The European Parliament’s lead lawmaker on draft fund-manager pay rules urged support for plans to cap bonuses at no more than fixed salaries as legislators prepare to vote on the measures today.
The curbs are needed to tame “a dreadful culture of excessive bonuses,” Sven Giegold, the German Green group lawmaker, told other legislators during a debate in the assembly’s Strasbourg premises. “The question is, do we want an excessive short-term driven culture or not?”
European asset-management firms are concerned the pay proposal, which targets managers of UCITS funds, will lead to a bidding war for their top traders, increasing fixed costs and making the industry more vulnerable to market downturns. Supporters of the plans argue that it would tame excessive risk taking and protect consumers.
The plans were narrowly adopted earlier this year by the parliament’s economic and monetary affairs committee.
While the bonus limits received support during the parliament debate from Socialist and Green lawmakers, concerns were expressed by Liberal, Christian Democrat and Conservative members that the measure goes too far. Legislators were also split over planned curbs on performance fees charged by UCITS funds.
“We do not support the bonus ceiling,” Anne Jensen, a Danish lawmaker in the parliament’s Liberal group, said during the debate.
UCITS, or Undertakings for Collective Investment in Transferable Securities, had more than 6 trillion euros ($7.8 trillion) under management as of April 2012, according to the European Commission. The funds are regulated at EU level and have the right to operate throughout the 27-nation bloc if they meet minimum oversight and investor-protection standards.
Parliament is weighing whether to add the rules to a draft law proposed by Michel Barnier, the EU’s financial services chief, to toughen UCITS regulation. The planned legislation must be approved by the parliament and national governments before it can take effect.
Parliament’s vote today will establish its negotiating position in the talks to come.
Barnier told lawmakers that he supported the principle of tackling excessive pay, and offered his services in brokering compromises on the draft law.
The EU “must take into account imperatively the long term interests of the consumer,” Barnier said, adding that he hoped that discussions on pay curbs “wouldn’t prevent this important file being finalized during the life of this parliament.” European Parliament elections are scheduled to take place next year.