Recently, China Merchants Bank (600036sh，03968.HK) issued an announcement that attracted the attention of the financial circle, announcing the recourse clawback of performance pay in 2022. According to the announcement, a total of 2,876 employees of the bank were retained for performance pay last year, with a total amount of 58.24 million yuan, and the average salary refund was 2030,000 yuan. This is the first time that the bank has disclosed the data of performance pay recourse clawback, and it is also the highest amount of recovery among the listed banks that have disclosed their annual reports.
This move by China Merchants Bank is based on the deferred payment of performance-based pay and recourse clawback mechanism established by China Merchants Bank. The purpose of this mechanism is to prevent the imprudent or non-compliant behavior of employees, which leads to the exposure of banking business risks or the occurrence of losses, thereby affecting the sound operation and long-term interests of the bank. According to the mechanism, the bank has the right to recover part or all of the performance remuneration that has been paid within the corresponding period and stop paying part or all of the unpaid remuneration for employees who fail to perform their duties diligently within their duties, resulting in major violations of laws and regulations by the bank or causing significant risk losses to the bank. The regime applies to senior management and employees in positions with a direct or significant impact on the risk, including those who have left the company or are retired.
China Merchants Bank's performance-based pay recourse clawback mechanism was established and improved under the impetus of supervision. In January 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Guiding Opinions on Establishing and Improving the Recourse Clawback Mechanism for Performance-based Remuneration of Banking and Insurance Institutions, requiring banking and insurance institutions to establish and improve the recourse clawback mechanism for performance-based remuneration in accordance with regulations. In June of the same year, the China Banking and Insurance Regulatory Commission (CBIRC) formulated the Corporate Governance Guidelines for Banking and Insurance Institutions, which once again clarified that banking and insurance institutions should establish a system of deferred payment of performance-based remuneration and recourse clawback. The China Banking and Insurance Regulatory Commission (CBIRC) said at the end of March this year that more than 95% of institutions had developed and implemented a system for deferred payment of performance-based pay and recourse clawback. Especially in some high-risk institutions, the relevant system has played an important role in holding non-compliant executives accountable and recovering asset losses.
China Merchants Bank's announcement on the recourse clawback of performance-based compensation has aroused widespread attention and heated discussions among the banking industry and investors. On the one hand, the announcement reflects that China Merchants Bank attaches great importance to and strictly implements risk management, which is conducive to improving the bank's compliance operation level and risk prevention capabilities, and maintaining the bank's reputation and credibility. On the other hand, the announcement also exposed some problems and risks existing in the process of business development of China Merchants Bank, and it is necessary to further strengthen internal control and prudential management to prevent the recurrence of similar situations. In addition, the announcement also put forward new challenges and thinking about the salary system and incentive mechanism of the banking industry, how to achieve a balance of rights, responsibilities and interests on the basis of clear rewards and punishments, stimulate the enthusiasm and creativity of employees, and promote the scientific and steady development of the banking industry, which is worthy of in-depth development. China Merchants Bank reversely demanded nearly 60 million wages from employees