Chinese investment bank CICC to demote senior bankers, cut their pay to reduce costs

The extremely rare move is being viewed by some staffers as a way for the bank to cut costs without making bankers redundant

The efforts to further drive down costs come as deals from IPOs to mergers and acquisitions in China and Hong Kong have plummeted in recent years

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CICC has communicated to bankers internally that some individuals could lose their managing director titles and be relegated to lower ranks under a new performance-rating system. Photo: VCG via Getty Images

Published: 12:39pm, 6 May 2024Updated: 1:25pm, 6 May 2024

China International Capital Corp is planning to demote some of its senior bankers and cut their pay, people with knowledge of the matter said, an unusual move that could lead to voluntary departures from one of the country’s largest investment banks.

CICC has communicated to bankers internally that some individuals could lose their managing director titles and be relegated to lower ranks under a new performance-rating system that took effect recently, said the people, who declined to be identified because the discussions were private.

Job demotions are exceedingly rare at financial institutions and large companies. CICC’s performance plan is being viewed by some staffers as a way for the bank to cut costs without making bankers redundant, as the latter would result in hefty restructuring expenses that typically come with lay-offs.

It is also very difficult for companies to terminate employees in mainland China. Demotions – or the threat of them – could lead bankers to resign, which would enable the firm to reduce its headcount through attrition, the people said.

CICC, whose banker pay was once on par with global firms such as Goldman Sachs and UBS Group, has been slashing bonuses for the past three years amid a slump in deal making. The state-owned Chinese bank has also been a lightning rod for pay reforms in the country’s finance industry, after authorities lashed out at bankers’ “hedonistic” lifestyles and referred to them as the “financial elite.”

As part of the new performance-rating plan, CICC bankers would be placed into five categories, according to people familiar with the matter.

Just 5 per cent of them will be in a top group, the next 45 per cent will fall into the second category, 20 per cent into a third group, 20 per cent into a fourth group and 10 per cent in the bottom group, the people said.