Fund managers are facing a push by European Parliament lawmakers to limit their bonuses, hours after Britain failed to water down planned EU banker-pay rules that are set to take effect from 2015.
The assembly’s economic and monetary affairs committee voted in favor of a ban on managers of EU regulated mutual funds, known as UCITS, from receiving bonuses larger than their fixed pay.
“Today’s vote would ensure greater protection for investors and help reduce excessively risky speculation,” Sven Giegold, the legislator leading work on the draft measures in the assembly, said in an e-mailed statement. “The rules as voted today would be an important step toward ending the gambler mentality in the investment fund sector.”
The move comes as European Parliament lawmakers and Ireland, which holds the rotating presidency of the EU, confirmed a compromise deal overhauling bank capital and liquidity rules for the 27-nation EU. That law will ban banker bonuses that are more than twice fixed pay, with scope for as much as a quarter of the bonus to be valued at a discount if payment is deferred for at least five years.
In calling for tougher fund-manager rules, lawmakers set the stage for a vote by the full parliament before negotiations with national diplomats can start.
The banker bonus restrictions, which beef-up rules that are already the toughest in the world, will “significantly reduce remuneration,” said Philippe Lamberts, one of the assembly’s lead lawmakers in the negotiations. “It will be impossible to match the excesses of yesterday with a structure that is much more constraining.”
The draft bank law sets out the EU’s approach to applying international capital and liquidity rules known as Basel III, drawn up following the collapse of Lehman Brothers Holdings Inc. While yesterday’s accord paves the way for the EU to start phasing in the Basel law by next January, it comes too late to limit 2014 bonus awards.
“The concession on timing will be welcomed” by lenders, Alex Beidas, employee-incentives specialist at law firm Linklaters LLP, said by e-mail. “But the banks had been hoping that further compromises would have been achieved.”
The City of London “is resilient and has faced down many challenges in its history,” said John Purcell, chief executive officer of Purcell & Co., a London executive-search firm.