China Restricts Short-term Bonus Taking by Banking Execs

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Both regulators and industry groups in China have sought to contain bonus levels for banking sector executives, as part of efforts to stem risk created by an excessive focus on short-term incentives.

The Asset Management Association of China (AMAC) unveiled new guidelines on Friday that stipulate the deferral of at least 40% of bonus payments to senior staff for periods of at least three years.

AMAC also requires that senior executives invest at least 20% of their bonuses in financial products issued by the companies where they work, and that banks reclaim payment and bonuses from any employees found guilty of engaging in misconduct.

AMAC said that the new guidelines were intended to contain the risk-taking behaviour and potential risk that is exacerbated when banking executives place an undue focus on the pursuit of short-term bonus payments.

The move from AMAC arrives following the release of similar guidelines by the Securities Association of China (SAC) last month.

Sources said to Financial Times that in January the Beijing office of the China Securities Regulatory Commission (CSRC) met with major domestic and foreign financial institutions, including CICC, Citic, Credit Suisse, Goldman Sachs and UBS, to discuss mechanisms to restrict payment levels.

Banks have also been briefed by regulators on the bonus guidelines released by AMAC and SAC.