The U.S. has pressed the European Union on draft rules to regulate hedge funds, but should respect Europe's right to decide its own legislation, a top EU finance official said Thursday.

Amadeu Altafaj Tardio, a spokesman for EU Finance Commissioner Michel Barnier, says U.S. Treasury Secretary Tim Geithner wrote the EU executive about hedge fund rules that were proposed last year and will be finalized in coming months.

He didn't give details on the content of the letter but said that Barnier was "convinced that the American treasury secretary would share his concern to respect" that EU governments and lawmakers are still discussing the text.

The rules regulating hedge funds and private equity funds have been criticized as too stringent by the financial industry — and as too loose by socialist lawmakers eager to crack down on risky trading.

They will likely be heavily amended by EU finance ministers — who will set out their views on Tuesday — and by the European Parliament which is yet to clarify its position. Britain, the home base of most funds, has demanded major changes.

Altafaj Tardio said the EU's rules were in line with a decision made by the Group of 20 leading and emerging economies to increase oversight for financial players that pose a risk to the financial system.

The European Commission suggested last April that managers of large hedge funds and private equity funds would have to register in Europe to do business there and would have to regularly inform regulators about their trades and debts to prove that they don't pose a risk to the financial system.

They would have to disclose their overall trading strategy, their risk management system and explain how they value and store assets — and be obliged to hold a minimum level of capital to cover potential losses. Only professional investors would be allowed to invest in these funds.

Funds based outside Europe would have to show that they face similar oversight at home and cooperate with European tax authorities before they could attract European investors — which was intended to pressure the U.S. to step up supervision there.

If the rules are agreed soon, they could be in place for EU funds by 2011 at the soonest and for funds outside Europe from at least 2014.