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By Huw Jones
LONDON, Feb 10 (Reuters) - Managers of the European Union'strillion-euro money market funds, which give access toshort-term finance at low interest rates, will need to showtheir pay packets do not encourage too much risk-taking under aproposal from the bloc's lawmakers.
It marks the latest EU attempt to extend pay rules forbankers to other parts of the financial sector in a bid to avoidthe 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 bycompanies to park cash and earn interest.
The European Parliament will vote in committee on Feb. 17 ona draft law to shine a light on money market funds and make arun on them in a financial crisis less likely.
The draft law was authored by the bloc's European Commissionbut lawmakers are discussing adding a new section to make paymore transparent, though stopping short of an actual cap onbankers' bonuses that is now EU law.
"Money market funds shall establish and apply remunerationpolicies and practices that are consistent with and that promotesound and effective risk management and do not encouragerisk-taking which is inconsistent with the risk profiles, rulesor instruments of incorporation of the MMF they manage," theproposed new section seen by Reuters states.
"The remuneration policies and practices shall cover fixedand variable components of salaries and discretionary pensionbenefits," it adds.
The likelihood of the extra rules making it to the finallaw, which would need backing from EU member states, will likelydepend on whether an attempt to impose a similar regime onmanagers of mutual funds is successful.
A separate draft law to revise the bloc's mutual funds rulesis being finalised.
Ahead of next week's vote, lawmakers meet privately thisweek to seek cross-party agreement on two divisive issues.
There is disagreement over whether some money market fundsmust have a safety buffer of capital. The role of the EuropeanSecurities and Markets Authority, an EU watchdog, in supervisingmoney market funds is also causing splits among lawmakers.
