U.S. Treasury Secretary Tim Geithner has written to the European Commission warning that plans to regulate hedge funds and private equity firms could cause tensions with Washington, the Financial Times reported.

Citing a letter but not quoting from it directly, the Financial Times said Geithner wrote to Michel Barnier, the European commissioner in charge of market regulation, on March 1 saying the EU was headed for a clash with the United States and Britain if the planned rules proved overly protectionist.

Barnier's office was not immediately available to comment or confirm that such a letter had been sent.

European officials are drafting new regulations on the hedge fund and private equity industries that proponents say are designed to limit their perceived role in aggravating the 2008-09 financial crisis.

Tight European regulations could have a big impact on the alternative investment industry in Britain and the United States, where most major hedge funds and private equity firms are based.

In his one-page letter, Geithner stressed a need for the United States and Europe to work together on regulation of the financial services industry, the Financial Times reported.

He warned that hedge funds, private equity firms and banks could be discriminated against if proposals to restrict the access of EU investors to funds based outside the 27 countries of the bloc were included in the final law.

The directive being considered by European Union officials could also force EU-based private equity and hedge funds to use only locally based banks as custodians and depositories.

(Writing by Luke Baker, editing by Dale Hudson)

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