Capping fund managers’ bonuses in a similar way to bankers’ payouts moved a step closer today after the European Parliament’s economic and monetary affairs committee agreed with calls for managers’ bonuses to be restricted to 100 per cent of basic salary, with half being paid in shares in the funds they manage.
The UK asset management industry is likely to be hit harder than any of its European rivals if the EU pushes on with its fund manager bonus cap, PricewaterhouseCoopers warns.
The committee’s plan will now be put to a vote for the entire European Parliament in April. If passed it will then be considered by the European Commission and EU finance ministers when it could become EU law.
Green MEP Sven Giegold who has driven the move said it would strengthen investor protection and create a level playing field after the bankers’ bonus cap.
PwC reward team partner Jon Terry says the vote in an important marker in the debate on bonus caps for the asset management industry.
“If the final rules are even close to what has been agreed today, then this will fundamentally change the way asset managers are paid. Asset managers who manage Ucits products are likely to push-back on why they are now facing the toughest pay rules across the whole of the financial services sector,” Terry says.
“UK fund management firms are set to be disproportionately hit by any bonus cap rules as bonuses tend to make up a greater proportion of pay. Many firms will have to completely review how they pay their fund managers and senior staff due to the large proportion of pay that would be affected by any such rules.”
Terry also warns that the committee’s definition of individuals facing a bonus cap could hit people in senior management and the front, middle and back offices. The industry has to build a persuasive case for the EU to water down the proposals, he adds.
The move comes the day after chancellor George Osborne unveiled a package of measures in his Budget 2013 to help support the UK asset management industry and make it more competitive on the international stage.