From 2014, senior asset management staff at banking organisations will see bonuses capped at 100 per cent of fixed salary, or 200 per cent with shareholder approval, under changes to the EU’s Capital Requirements Directive.
However, the European Parliament last week narrowly voted against imposing similar restrictions on other fund managers running mainstream Ucits funds.
Although just a handful of asset management professionals are currently subject to CRD rules, the European Banking Authority wants to widen the definition of code staff or material risk-takers to include anyone earning above €500,000, inclusive of bonuses.
The EBA also wants the cap to apply to bank staff earning a bonus of more than €75,000 when that represents more than 75 per cent of fixed pay. This move would broaden the range of employees it applies to significantly.
Dan Perrett, a senior consultant in the executive compensation team at Towers Watson, the consultancy, said last week’s European Parliament vote was “welcome news” for independent houses. However, he said it would create “an uneven playing field between those that are independent and those that are at banks”.
The ceiling on variable pay will apply to code staff at bank-owned European asset managers, as well as US banks with European fund management operations.
Some EU member states, including the Netherlands and Italy, are likely to apply stringent pay caps across the entire financial services sector, including independent fund groups. Others, such as Germany and the UK, are likely to limit ceilings on bonuses to bank-owned entities.
Source: Financial Times. Read full article here – EU bonus cap hits bank-owned asset managers