Dutch banking bonus cap could disappear with new Europe rules

New rules proposed by the European Commission could mean an end to the bonus cap for hundreds of Dutch investment firms, though the cap may still apply to companies large enough to be considered systematically important, such as banks and insurers, BNR reports.

Currently companies in Netherlands' financial sector can pay their employees a maximum bonus of 20 percent of their fixed income. If the European Commission has its way, asset managers, stock brokers and other investment firms will be able to determine their employees' bonuses themselves. This will affect around 300 investment companies in the Netherlands, according to the AFM's register.

According to the European Commission, investment companies' strong dependence on the economy and the sentiment on the stock market leads to very volatile income. Strict compensation rules could force these companies to pay their employees more than they can afford in bad times, which could jeopardize their survival in the worst case scenario.

These new proposed rules are still on the drawing table, so it may still be a few years before the are implemented. The Dutch government approves of the plans and supports "a more proportional application of remuneration rules", Minister Sigrid Kaag of Foreign Affairs said in a reaction.

Last month Minister Wopke Hoekstra of Finance proposed scrapping the bonus platform for flash traders, but this was rejected by the Tweede Kamer, the lower house of Dutch parliament. The Kamer can't block the European Commission's new rules.