The British prime minister and French president are to meet today (March 12th 2010) in an attempt to hammer out a deal on the issue, reports the Financial Times.
While the French wish to see tougher restrictions placed on the activities of such funds, including only allowing them to use locally-based banks to hold capital, the British believe the move is an attempt to curb its dominance of the financial services industry on the continent.
Earlier this week, US Treasury secretary Timothy Geithner weighed into the debate - telling Michel Barnier, Europe's internal market commissioner, that global rather than local regulation is needed.
Meanwhile, Lord Myners, the financial services minister in the UK, has promised to fight the current form of the proposals "line by line and minute by minute" until a better deal is reached.
By Claire Archer