However, UK Conservative MEP Syed Kamall brokered an amendment with the European People's Party (EPP) and the Liberals (ALDE) to scrap the bonus cap. The amendment was passed this morning. It establishes that bonuses
"shall be considerably contracted where subdued or negative financial performance of the management company or of the UCITS concerned occurs, taking into account both current compensation and reductions in payouts of amounts previously earned."MEPs will now wait for EU member states to agree on a common position on the new UCITS rules. After that, negotiations will start.
Mr Giegold has called today a 'schwarzer Tag' (a 'black day'), but the truth is the bonus cap would have been a bad idea for a number of reasons:
- Unlike banks, investment funds haven't received a penny from taxpayer-backed rescue packages. Therefore, although one can agree with the need to align pay with performance in the financial services sector, it would have made little sense to impose on fund managers a harsher bonus cap than the one recently introduced for bankers.
- The cap would also have undermined the competitiveness of the UCITS industry, which currently accounts for over 70% of net assets managed by the entire European investment fund industry.
- Perhaps most importantly, such a largely ideological measure could have made the City of London more eurosceptic at a time when the debate over the future of UK-EU relations is at a crucial stage.
However, today's vote shows that the UK is indeed listened to in Europe when it comes to financial regulation (although it also helped that a lot of UCITS funds are based in France). It's all about having a clear negotiating strategy and moving early enough in the EU's law-making process.