Caixin
May 18, 2018 07:33 PM
FINANCE

Financial Regulatory Staff See Move to Central Bank as Step Down

Guo Shuqing, the head of the banking and insurance regulator and central bank Communist Party secretary, had to personally intervene to placate officials disgruntled about being moved to the People's Bank of China. Photo: VCG
Guo Shuqing, the head of the banking and insurance regulator and central bank Communist Party secretary, had to personally intervene to placate officials disgruntled about being moved to the People's Bank of China. Photo: VCG

*Officials being moved from regulator to central bank unhappy about smaller pay checks, less opportunity to move up the ladder or jump into lucrative private positions

*Though state media has called for a dismantling of ‘revolving door’ between regulator, financial institutions, government rejected calls to bump up central bank staff’s pay

The reshuffle of financial regulatory agencies has met resistance from some of their employees, who are concerned the overhaul could lower their salaries and diminish the prospects of a promotion or a jump to well-paying private companies.

The People’s Bank of China (PBOC) is seeking to transfer dozens of officials with the policy research and regulation drafting departments of the newly merged China Banking and Insurance Regulatory Commission (CBIRC) to its headquarters, Caixin has learned.

The move is aimed at beefing up the PBOC’s financial policymaking and prudential supervision abilities, as the central bank takes over the “responsibility of drafting key laws and regulations for the banking and insurance industry” from the watchdog of the two sectors as part of the government overhaul announced in March by the State Council, China’s cabinet.

However, CBIRC employees have resisted the plan to the point where the commission’s chairman, Guo Shuqing, who is also the party chief of the central bank, had to personally intervene in an attempt to persuade the officials, a source with knowledge of the matter said.

“The CBIRC head office offers higher salaries compared to the People’s Bank of China’s head office,” a source at the central bank’s headquarters told Caixin.

“The CBIRC also directly supervises financial institutions, making it easier to land positions in the industry later on,” the source said, adding that advancement up the regulatory ranks has been “fast” in the past few years, making it “only natural” that officials are reluctant to move to the central bank.

Employees at China’s banking and insurance regulator are technically employees of a nonprofit public organization, while officials at the central bank’s head office are civil servants. They are thus on different compensation programs.

If officials leave their government job for industry positions, or even to join the financial institutions they used to supervise, they can expect their pay to multiply.

Senior managers’ annual compensation at the five state-owned banks average just over 600,000 yuan ($94,200) despite limits imposed by the government several years ago on their pay, according to a report earlier this month by the Economic Observer. Senior executives can expect to get even higher salaries at non-state banks, according to the report.

In comparison, a section head at the central bank, for example, can expect a base annual salary of around 100,000 yuan after taxes, sources told Caixin.

More than 12 officials moved from the banking regulator to traditional banking institutions and internet companies between 2013 and early 2017, according to a report from Sohu.com, citing publicly available documents.

Many more moves are happening at a local level. A division head of a local branch of the banking regulator joined a bank in Chengdu as its deputy governor when he was about to retire, mainly to deal with regulatory checks, a banker told Caixin earlier.

In February this year, the official People’s Daily published a commentary calling for realigning officials’ interests with the regulator rather than those they regulate. “If regulation is really going to have teeth, we must dismantle the ‘revolving door’ between financial institutions and regulatory bodies, and prevent their interests from becoming entwined,” a commentator named Ouyang Jie wrote.

Caixin learned that the central bank petitioned for a pay raise for its employees with higher levels of government, who rejected the request on the grounds that the PBOC is part of the country’s civil-servant staffing structure and thus its salary scale should be in line with other government agencies’ to avoid inequalities.

In December, the International Monetary Fund and the World Bank issued a report saying “increased resources, in salary scale and staffing for the more specialist fields” are an “urgent need” for strengthening Chinese financial watchdogs’ capabilities and effectiveness. They pointed out that the overall size of the banking regulator’s workforce has been “static for a decade,” warning that “key staff are increasingly attractive to and attracted by industry opportunities.”

More details on staffing structure and how departments will be arranged following the merger of the insurance and banking regulators are expected to emerge in June, according to the official Securities Times’ social media account earlier this week.

Contact reporter Liu Xiao (liuxiao@caixin.com)

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