File photo shows the entrance of 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 asked foreign investment banks to limit executive compensation, saying that while working to prevent financial risks, it respects the business decision-making of foreign institutions.
The CSRC, the country’s top securities regulator, and industry associations held no meetings where foreign investment banks were asked to share executive compensation details and cut pay levels, according to a statement.
The CSRC said it, along with industry associations, had issued compensation management guidelines after listening to industry suggestions, which reflected “market respect” and was a move to better serve the real economy and minimize financial risks. But it did not set a cap on compensation, nor on total salary and specific operations, the CSRC said.
The guidelines include strengthening long-term incentives and holdback mechanisms, and implementing deferred salary arrangements, the CSRC added.
The Financial Times alleged in a report on Monday that China’s securities regulator and industry associations ordered Chinese and foreign investment banks to cap executive pay.
The report said the new guidelines were finalized months after the CSRC’s Beijing office convened a January meeting on executive compensation oversight, attended by financial institutions including CICC, Citic Securities, Credit Suisse, Goldman Sachs and UBS.
The CSRC said it has approved 11 foreign-owned securities fund companies to operate in China, and their operations have been in line with expectations, and the CSRC fully respects the decision-making autonomy of these institutions.
The compensation system is an important part of corporate governance, and the construction of a scientific and reasonable compensation system is the basis for maintaining the core competitiveness of the industry, as well as the basis for maintaining its stable development. and sustainable, said the CSRC.
The regulator further noted that global securities regulators have paid more attention to the remuneration-related incentive system in recent years, to prevent financial risks caused by excessive speculation and incentives.
Industry regulators in Europe and the United States have formulated comprehensive regulatory systems and rules on the management of the remuneration (salary) of senior executives in the financial sector, in order to regulate the remuneration of financial practitioners to prevent executives to speculate excessively in order to obtain high wages.