Battle of the financial centres


The response to the financial crisis of world governments, particularly the US, and financial regulatory authorities across Europe, has led to a new chapter in the ongoing regulatory arbitrage war. Financial centres in the Caribbean and Europe are doing battle over which has the regulations best suited to setting up investment funds. Some business, particularly that related to hedge funds, is defecting from the Cayman Islands and British Virgin Islands to Dublin and Luxembourg. Malta is a relatively new entrant in the regulatory arbitrage stakes, but one well-placed to grab a share of the business. Parallel to these developments is a desire among investors to have safer, better regulated funds. That is why they are flocking to European vehicles, stamped with the Ucits brand, meaning they are cleared by EU regulators. The financial centres which can exploit the Ucits legislation, while keeping costs low, may be the ones which will win out in the long-term.