FT (June 1) reported that Chinese securities regulators and industry associations have
instructed local and foreign banks to rein in executive pay levels. On May 27, the Asset
Management Association of China (AMAC) instructed fund houses to “enhance [their] social
responsibility and capability to serve the economy and the country’s strategies”. According to
the AMAC’s new rules, at least 40 per cent of bonus payments to senior staff should be deferred
for three or more years. The association also decreed that senior staff should invest at least 20
per cent of their bonuses in financial products issued by their own companies. It added that the
guidelines were intended to corral “risk-taking behaviour and potential risks” stemming from
executives’ pursuit of short-term bonus payouts. The Securities Association of China issued
similar guidelines last month. The new guidelines were finalised months after the Beijing office
of China’s securities regulator convened a meeting in January about pay restraint with financial
institutions including CICC, Citic, Credit Suisse, Goldman Sachs, and UBS. Domestic and
foreign banks were also briefed more recently on the new pay rules issued by the AMAC and
the SAC. Citic, CICC and UBS did not respond immediately to requests for comment. Credit
Suisse and Goldman Sachs declined to comment. The regulators’ instructions to financial
industry representatives, which were first reported by Bloomberg, marked the latest efforts by
Xi’s administration to constrain the sector.
(Comment: Salary cutbacks and withdrawal of bonuses are being affected across all of China's
31 Provinces and ARs.)
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