Europe's fund managers are facing a ban on bonuses that exceed salary, as the European Parliament pushes for the extension of its severe pay clampdown on bankers to the wider financial sector.
The European parliament’s main parties support inserting the curbs into a year-old reform proposal for UCITS funds – a popular investment product that can be sold across EU borders – which have net assets of €6.4 trillion.
The parliament’s draft negotiating position would enforce a maximum 1:1 ratio of bonus to salary and requires up to 60 per cent of the variable element to be deferred and largely paid in units of the fund the manager runs. If agreed, the UCITS overhaul will be a shock to the fund management sector, which until now has largely enjoyed free rein to set managers’ pay without having to disclose the details to the public. EU Member States must also approve the proposal for it to become law.
While most EU ministers put up little resistance to the bonus cap for bankers – which in Europe will primarily hit those based in London – applying it to fund managers may prove more politically divisive. France, Luxembourg and Ireland are big hubs for UCITS funds. The vote comes as the parliament and EU Member States this week finalise the technical details of the bankers’ bonus cap. Britain is pushing for some tweaks to how the cap is applied but looks unlikely to win an exemption for bank offshoots outside the EU.
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