LONDON, Feb 10 (Reuters) - Managers of the European Union's trillion-euro money market funds, which give access to short-term finance at low interest rates, will need to show their pay packets do not encourage too much risk-taking under a proposal from the bloc's lawmakers.
It marks the latest EU attempt to extend pay rules for bankers to other parts of the financial sector in a bid to avoid the lure of a big bonus encouraging people to take on more risk.
Money market funds in the EU are mainly based in France, Ireland and Luxembourg, with Black Rock and Legal & General among the leading players.
They are heavily used by banks for short-term funding and by companies to park cash and earn interest.
The European Parliament will vote in committee on Feb. 17 on a draft law to shine a light on money market funds and make a run on them in a financial crisis less likely.
The draft law was authored by the bloc's European Commission but lawmakers are discussing adding a new section to make pay more transparent, though stopping short of an actual cap on bankers' bonuses that is now EU law.
"Money market funds shall establish and apply remuneration policies and practices that are consistent with and that promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the MMF they manage," the proposed new section seen by Reuters states.
"The remuneration policies and practices shall cover fixed and variable components of salaries and discretionary pension benefits," it adds.
The likelihood of the extra rules making it to the final law, which would need backing from EU member states, will likely depend on whether an attempt to impose a similar regime on managers of mutual funds is successful.
A separate draft law to revise the bloc's mutual funds rules is being finalised.
Ahead of next week's vote, lawmakers meet privately this week to seek cross-party agreement on two divisive issues.
There is disagreement over whether some money market funds must have a safety buffer of capital. The role of the European Securities and Markets Authority, an EU watchdog, in supervising money market funds is also causing splits among lawmakers.