China’s securities regulator denies asking foreign investment banks to cap executive pay
Published: Jun 14, 2022 04:42 PM
File photo shows the entrance of the China Securities Regulatory Commission (CSRC) in Beijing, capital of China. (Photo:Xinhua)

File photo shows the entrance of the China Securities Regulatory Commission (CSRC) in Beijing, capital of China. (Photo:Xinhua)

The China Securities Regulatory Commission (CSRC) on Tuesday denied media reports that it had told foreign investment banks to rein in their executives' compensation, saying that while striving to prevent financial risks, it respects foreign institutions' business decision-making. 

The CSRC, the country's top securities regulator, and industry associations didn't hold any meeting where foreign investment banks were told to report details of executive compensation and reduce pay levels, according to a statement.

The CSRC said that it, along with industry associations, had issued compensation management guidelines after listening to industry suggestions, which reflected "respect for the market" and was a move to better serve the real economy and minimize financial risks. But it did not set a cap on compensation, nor does it involve the total salary and specific operations, the CSRC said.

The guidelines include strengthening long-term incentives and restraint mechanisms, and implementing deferred salary arrangements, the CSRC added.

The Financial Times alleged in a report on Monday that the Chinese securities regulator and industry associations have instructed Chinese and foreign investment banks to rein in compensation for executives. 

The report said the new guidelines were finalized months after the Beijing office of the CSRC convened a meeting in January about controlling executive pay, attended by financial institutions, including CICC, Citic Securities, Credit Suisse, Goldman Sachs and UBS.

The CSRC said that it has approved 11 foreign-owned securities fund companies for operating in China, and their operations have been in line with expectations, and the CSRC fully respects the autonomy of those institutions' decision-making.

The remuneration system is an important part of corporate governance, and building a scientific and reasonable remuneration system is the basis for maintaining the core competitiveness of the industry, as well as the foundation for maintaining its stable and sustainable development, the CSRC said.

The regulator further noted that global securities regulatory authorities have paid more attention to the compensation incentive-related system in recent years, in order to prevent financial risks caused by excessive speculation and incentives.

Industry regulators in Europe and the US have formulated comprehensive regulatory systems and rules on compensation (salary) management of top financial-sector executives, in order regulate the remuneration of financial practitioners to prevent executives from taking excessive speculation in order to obtain high salaries.

Global Times