China's banking regulator yesterday issued guidelines regulating executive compensation in a bid to ensure 'prudent practices' and address growing discontent about rich pay packages at banks. Performance-based benefits for key executives at commercial banks should be no more than three times their basic salaries. And at least 40 per cent of the pay linked to performance should be withheld for at least three years, the China Banking Regulatory Commission said on its website. Lenders can reclaim bonuses already paid to executives and suspend future pay if their actions lead to large losses. The guidelines apply to policy and commercial banks and financial leasing companies. The rules set up a compensation mechanism for banks, but it is still up to boards of directors to decide pay levels, the CBRC said. The new rules reflect the widespread belief that across the globe some executive pay plans led banks to take excessive risks. The guidelines are also aimed at promoting 'a harmonious society', and Beijing has put a great emphasis on pay at financial institutions, the CBRC said. According to their annual reports, Bank of Ningbo vice-governor Qiu Shaozhong was entitled to more than six million yuan (HK$6.81 million) in remuneration last year, while Li Renjie, president of Industrial Bank, was entitled to 2.7 million yuan. Shenyin Wanguo Securities analyst Li Yamin said: 'It is not a surprise to see the policy. It also has political implications because the general public has been venting its anger at bank executives, contending that they don't deserve the high pay.' In his government work report to the annual session of the National People's Congress (NPC) last week, Premier Wen Jiabao said: 'We should not only make our social wealth pie bigger, we should also divide the pie more reasonably through a better wealth-redistribution system.' However, Li said that in view of such a policy, the industry would likely face a brain drain as talented bankers chase higher salaries at other finance sectors such as private equity funds.