CHINA’S regulators told the country’s brokerages to set up a sound remuneration system, warning that excessive, or short-term, incentives to employees could trigger compliance risks.

Incentives and short-term rewards that are too big will trigger compliance risks, said recent guidelines published by the Securities Association of China.

Securities firms’ remuneration system should also be closely linked with risk management, while pay disbursements should be smoothed out in arrangements that take into account market fluctuations and industry cycles, according to the guidelines posted on the association’s website.

Pay of bankers shouldn’t be directly linked to the revenue they bring in for underwriting deals, while senior executives must be held accountable financially if they violate regulations or cause excessive risk exposure, the statement said.

In addition, brokerages should set up a deferred remuneration payment system for chairman and senior managers, under which executive pay is put off for a later date, to discourage top bankers from recklessly taking risks that would only be exposed years later.

The guidelines come amid rising competition for bankers and wealth managers, as Wall Street banks aggressively hire to expand in China, which has fully opened up its securities industry. (SD-Agencies)