From Bloomberg via The Straits Times, September 11/12:
China is turning up the heat on its army of 8,700 investment bankers.
After being forced to take big pay cuts and adhere to other belt-tightening measures under President Xi Jinping’s years-long common prosperity campaign, the country’s dealmakers are now in the crosshairs of the nation’s top graft buster.
At least three top investment bankers from different securities firms have been detained by Chinese authorities since August, sending a chill through the industry. One of them, who used to oversee dealmaking at Haitong Securities, fled the country and was arrested overseas about two weeks ago, before being repatriated back to China in an incident widely publicised on state media.
Haitong and other state-backed brokerages recently asked many of their investment bankers to hand in their passports and seek permission for all business and personal travel plans, according to people familiar with the matter. The requests followed private guidance from Chinese regulators, said the people, who asked not to be identified discussing internal matters.
Some employees were told that regulators are scrutinising initial public offerings and other capital-raising activities, and that bankers could be called in for questioning at any time, the people said.
The brokerages have tightened approvals for overseas trips and told staffers that they also need to get approval if they wish to resign, the people familiar added. Those approved for business travel have to do so with a co-worker, and activities outside pre-approved itineraries would be restricted, according to one of the people.
In China, state-owned enterprises have been known to hold the passports of their senior executives and Communist Party officials. It is unusual for companies to extend that requirement to lower-ranking employees and junior staff, like in the case of Haitong and other brokerages. Haitong did not immediately respond to a request for comment.
The detentions of investment bankers and regulatory probes are also raising questions about the future of China’s US$1.7 trillion (S$2.2 trillion) brokerage industry and domestic capital markets activities, which have already slowed sharply while the broader economy sputters. China’s state-owned financial institutions have capped annual pay for senior staffers at 2.9 million yuan (S$531,000), while recent pay cuts for onshore bankers at China International Capital have been as much as 25 per cent of their base salaries.
“All these crackdowns and restrictions will hurt the morale of financial workers,” Mr Shen Meng, a director at Beijing-based boutique investment bank Chanson & Company. But if problems can be rooted out, then the industry could perform better in the future, he added. Mr Shen said the goal of the authorities is “to profoundly change the distribution of the profit pie in the entire financial industry”....
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