Abstract

Despite the tremendous growth of the hedge fund sector in Europe, the world of hedge funds is still shrouded in a veil of mystery. Politicians and regulators have regularly criticized the hedge fund industry for threatening financial stability. The present article aims at assessing the systemic risk posed by hedge funds and offering a general framework for the regulation of hedge funds in the Eurozone which may pose financial stability risks. In particular, this article will argue in favor of allocating supervisory responsibility for large systemically important hedge funds to the ECB.

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