Fund Managers May Face Bank-Style Bonus Curbs in Draft EU Plan

Managers of retail investment funds in the European Union may face pay curbs similar to those imposed on bankers as the European Parliament seeks to crack down on awards it says encourage excessive risk taking.

European Parliament lawmakers may seek to ban managers of so-called UCITS funds from receiving bonuses worth more than their fixed pay, according to draft plans obtained by Bloomberg News. The move follows a compromise deal last month between the assembly and national governments to cap banker bonuses at twice fixed pay.

“The UCITS bonus cap will ensure that the bankers’ cap cannot be circumvented,” Sven Giegold, the lawmaker leading the assembly’s work on the fund manager rules, said in an e-mail. “We need a level playing field in the interest of financial stability.”

Payouts in the financial industry have been under scrutiny since the 2008 collapse of Lehman Brothers Holdings Inc. and the government rescue of American International Group Inc., which were blamed in part on traders and executives making risky bets to boost results and subsequent bonuses.

Like the bank rules, the measures for UCITS must be approved by parliament and national governments before they can take effect. Parliament’s economic and monetary affairs committee is set to vote on its negotiating position on March 21, according to the assembly’s website.

Under the draft parliament plans, payment of at least a quarter of a fund manager’s bonus would need to be deferred, with this figure rising to 60 percent for “particularly high,” pay awards.

The Financial Times reported on the latest proposals yesterday.

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net