European MPs want the European Commission to draw up tougher laws to regulate the activities of hedge funds and private equity funds.
The proposals come in a report which is set to form the basis of new EU legislation.
The European Parliament backed the report in a vote on Tuesday.
The report says company managers' reward packages must be made more transparent.
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The report was prepared before the Wall Street banking crisis which saw the collapse of Lehman Brothers investment bank and the US authorities' move to stabilise markets with a $700bn (475bn-euro, Ј375bn) public bail-out plan.
Former Danish Prime Minister Poul Nyrup Rasmussen, who now heads the Party of European Socialists, compiled the report. It urges the European Commission to draw up new financial legislation before the end of 2008.
MEPs backed the report, with 562 voting for, 86 against and 25 abstaining.
The report says capital requirements "should be mandatory for all financial institutions and should reflect risk".
It calls for codes of conduct for credit rating agencies, "regarding visibility of assumptions, product complexity and business practices". It also wants EU oversight of the agencies' activities.
"Reward packages should be aligned with longer term outcomes, reflecting losses as well as profits," the report says.
The commission should also ensure that barriers to cross-border investments by venture capital funds are removed in the EU, the report says.
'No knee-jerk reaction'
Liberal Democrat MEPs say they softened the original draft of Mr Rasmussen's report, so that hedge funds and private equity were not singled out.
Lib Dem MEP Sharon Bowles said "it is important that the parliament does not adopt a reactionary, knee-jerk response to recent events.
"To target hedge funds and private equity specifically for regulation is not the right approach. Regulation must be non-discriminatory and must be part of a broader overall package of monitoring risk."
Those concerns were echoed by British Conservative MEP John Purvis, who said "an overzealous knee-jerk reaction in Europe is futile in a global economy".
"The response from Europe should be measured and international. We should accept that there needs to be a greater level of openness and transparency from hedge funds, but the European Parliament is right to avoid rushing into overzealous legislation."
(BBC)
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