The European Central Bank (ECB) has added its voice to criticism of the draft alternative investment fund managers directive, warning the proposals would create an unequal playing field.

The bank said it supported the intention to provide a "harmonised regulatory and supervisory framework" for alternative investments but that a number of revisions needed to be made to the draft directive, which was first published in April this year.

The statement was contained in an opinion published on its website.

"The ECB sees a potential risk of regulatory arbitrage between alternative investment fund managers, insurance companies and credit institutions among which the proposed directive does not create a level playing field," said the opinion.

It said the European commission needed to talk to other countries, especially the US, "to ensure a globally coherent regulatory and supervisory framework."

The opinion was critical of the directive's current definition of leverage. "The concept of leverage is fundamental to the business model implemented by many AIFMs. The definition of ‘leverage' under the proposed directive does not, however, include specific leverage ratio concepts," said the ECB.

It proposed the introduction of "balanced and appropriately risk-adjusted leverage limits" which took the full risk profile of hedge funds and other alternative investment vehicles into account.

The bank said it was concerned about proposals regulating the marketing of funds domiciled in a non-European country to European investors. In particular it proposed adding an article to allow investors to continue holding shares or units in a third-country fund purchased before the directive's implementation.

The opinion also suggested broadening the definition of a depositary to include credit institutions authorised in accordance with national law as well as those authorised under the 2006 capital requirements directive.

The European parliament's committee for economic and monetary affairs is to hold a hearing and a workshop on the directive on November 10.