Public banks' "reverse salary recovery" ledger: Bank of China's three-year recovery of over 100 million yuan—sign of maturity or a passive move?

“Can a performance bonus you’ve already received be reclaimed?” As 2025 annual reports from listed banks continue to be released, “reverse salary recovery”—meaning the clawback of performance compensation after it has been paid—has once again become the focus of public attention.

According to statistics compiled by a reporter from Jiemian News as of April 6, among the listed banks that have already disclosed their 2025 annual reports, nearly all of them mention in their annual reports the implementation of performance-compensation clawback mechanisms. Among them, Bank of China (601988.SH, 03988.HK) reclaimed the most—more than RMB 47 million; Yibin Bank (02596.HK) reclaimed the least—only RMB 2,300.

“The banking industry is a typical ‘profit upfront, risk postponed’ business.” A person from the risk management department of a joint-stock bank told a Jiemian News reporter: “When a credit business is granted, there is already profit, but the risk may only become apparent years later. If performance compensation is not paid later and clawed back, it is easy for moral hazard to arise, where employees ignore long-term risks in pursuit of short-term performance.”

Large gaps between interbank peers; Bank of China leads

Based on the 2025 data already disclosed, Bank of China ranks first among the banks that have released annual reports, with a clawback amount of RMB 47.1782 million and 4,630 person-times of recoveries.

What is worth noting is that Bank of China has disclosed clawback information for three consecutive years: in 2023, it recovered RMB 22.75 million involving 2,059 person-times; in 2024, it recovered RMB 32.50 million involving 2,469 person-times; and in 2025, it recovered RMB 47.1782 million involving 4,630 person-times. Over the three years combined, total clawbacks exceeded RMB 102 million, involving 9,158 person-times.

The annual report shows that, according to the type of institution, scale, and job risk-control responsibilities, Bank of China delays payment of more than 40% of performance compensation for senior management and personnel in key positions. The deferral period is generally no less than 3 years. At the same time, it has also formulated rules for clawback of performance compensation—for example, if during employment, risk losses beyond normal exposure occur within the scope of duties, it may partially or fully recover the performance compensation paid for the corresponding period, and it will stop payment of the portion that has not yet been paid.

The clawback scale at China Construction Bank is relatively mild. In 2025, its directors and senior management had no cases of performance compensation clawback. However, 17 person-times among management personnel at the headquarters and people at corresponding levels were subject to clawback, involving an amount of RMB 1.99 million, down from 26 person-times and RMB 3.74 million in 2024.

Among the joint-stock banks with disclosed specific data, Bohai Bank (09668.HK) in 2025 clawed back performance compensation for 816 person-times, totaling RMB 19.58 million; the amount decreased compared with 612 person-times and RMB 24.03 million in 2024. Huaxia Bank: in 2025 it implemented clawback of performance compensation for 577 employees, with a total of RMB 9.8503 million, down sharply from 751 person-times and RMB 22.2070 million in 2024.

Among local banks, Zhongyuan Bank (01216.HK) stands out in the 2025 clawback scale, reaching RMB 13.5715 million. This is also the second consecutive year in which the bank’s clawback amount exceeded RMB 154.6k, after it clawed back RMB 20.1076 million in 2024.

Some local banks may not have large absolute clawback amounts in 2025, but they also disclosed them. For example, RuiFeng Bank (601528.SH) clawed back RMB 3.8221 million; Dongguan Rural Commercial Bank (09889.HK) had total clawback and penalties of RMB 3.66 million; Chongqing Rural Commercial Bank (601077.SH)累计 clawed back RMB 2.9093 million; Jinshang Bank (02558.HK) clawed back performance compensation for 30 employees, totaling about RMB 154.6k. Yibin Bank clawed back RMB 2,300.

Industrial and Commercial Bank of China (601398.SH, 01398.HK), China Merchants Bank (600036.SH, 03968.HK), Minsheng Bank (600016.SH, 01988.HK), and others clearly stated in their annual reports that they have established relevant systems and implemented them, but they did not disclose specific amounts.

Senior analyst Wang Pengbo at financial-industry consulting firm BoTong Consulting told a Jiemian News reporter that, from the perspective of state-owned large banks, their asset base is large and business cycles are long. Combined with the increasingly explicit regulatory requirements for accountability tracing in recent years, it is not surprising to see clawbacks on a large scale. As for some city commercial banks with smaller clawback amounts, it does not necessarily mean they manage risk better; it could simply mean problems have not been fully exposed yet, or that their accountability mechanisms are still gradually being improved. “So you can’t determine which bank’s risk controls are stronger just by looking at the size of the clawback numbers; you also need to look at more substantive indicators together, such as the non-performing loan ratio and the loan loss reserve coverage ratio.”

Why is “reverse salary recovery” a must?

In fact, the performance compensation clawback mechanism is not a new thing in 2025. Its policy lineage can be traced back to 2010, when the original China Banking Regulatory Commission (CBRC) issued the “Guidance on Sound Compensation Regulation for Commercial Banks.” That document for the first time clarified that commercial banks should formulate rules for deferred recovery and clawback of performance compensation.

What is referred to as “clawback of performance compensation”—the “reverse salary recovery” that is commonly discussed in the industry—usually means that when an employee engages in violations or misconduct, or when risk losses within the scope of their responsibilities are abnormally exposed, among other situations, the bank, based on relevant rules, may stop payment of performance compensation that has not yet been paid to the corresponding person depending on the severity of the circumstances, or recover part of the performance compensation that has already been paid.

Regarding the nature of “reverse salary recovery,” there are currently two views in the market. One view holds that it is a sign of mature bank governance—that the bank has the ability to trace risks backward and mechanisms to carry responsibilities through, so it can effectively constrain employee behavior. Another view holds that it is a passive move under operating pressure—that the expansion of clawback amounts reflects that banks’ asset quality faces pressure and that risk exposure has increased.

Xue Hongyan, a special research fellow at SuShang Bank, told a Jiemian News reporter that from the perspective of risk management, “reverse salary recovery” is both a sign of bank maturity and, to a certain extent, a reflection of passive choices under operating pressure, and the two are intertwined. The system originates from the 2010 regulatory guidance; it was further strengthened in 2021; and most financial institutions have already completed implementation of the system. As a sign of maturity, it embodies the principle that compensation is linked to risk, breaks the traditional “compensation is paid but not pursued,” strengthens risk-responsibility awareness among executives and key-position personnel, and builds a system to balance incentives and constraints. When a bank can precisely link clawbacks to specific risk events, implement differentiated treatment, and establish standardized processes and appeal channels, that demonstrates an improvement in risk management capabilities.

Xue Hongyan further told a Jiemian News reporter that, however, from the perspective of operating pressure, in recent years banks’ profit growth has slowed, net interest margins have narrowed, and pressure from non-performing loans has increased. Some banks may throttle internally by expanding the scope or proportion of clawbacks, and even have controversial practices of including normal benefits in recovery. This reflects a passive tendency under operating pressure, especially when clawbacks are “one-size-fits-all” or overly targeted at frontline employees.

Tian Lihui, dean of the Institute of Finance and Development at Nankai University, told a Jiemian News reporter that “reverse salary recovery” is both a sign of maturity and a necessary arrangement under pressure; the two are not in opposition. This mechanism links compensation incentives to performance after risk adjustment, forcing practitioners to prudently weigh benefits against risks during business expansion. It also signals that banks’ risk management is extending from “pre-approval” and “in-process monitoring” toward “post-event accountability,” forming a full-chain closed loop.

“From the pressure side, in recent years some banks’ risk assets have continued to be exposed, and the hidden risks accumulated from overly generous incentives in the past are gradually being released. Objectively, clawback recovery is also a remedial measure for banks to hedge historical risks and digest existing burdens. If this mechanism is truly and effectively implemented, it shows that banks have the ability to trace risks and mechanisms to implement responsibility—but it also requires vigilance against formalistic operations. At the end of the day, forced maturity is still maturity.” Tian Lihui said to a Jiemian News reporter.

Wang Pengbo told a Jiemian News reporter that, from an industry perspective, this long-term approach is conducive to making the banking system more robust and reducing the inertia of re-investment while neglecting management. Of course, it may also bring another problem: some institutions may become overly conservative, not daring to extend loans that should be extended. So going forward, it will still be necessary to find a better balance between incentives and constraints.

Where is the legal boundary?

How can a bank’s “reverse salary recovery” behavior be carried out legally and in compliance?

In judicial practice, there are cases where banks have successfully pursued clawbacks. In May 2025, a second-instance civil judgment posted on China’s Court Documents Online showed that a branch manager at Guangfa Bank Xi’an Branch—Tan (a surname)—as the person in charge of the business unit for a SuNing Real Estate credit granting project, had failures in performing duties in steps such as pre-loan investigation, disbursement, and post-loan management. These failures led to the outstanding principal amount of overdue loans reaching as much as RMB 1.1 billion. The bank imposed an administrative demotion and deducted RMB 427.4k in performance pay. Tan filed a lawsuit to recover the salary, but both the court of first instance and the court of second instance rejected the appeal and upheld the original judgment.

But not all “reverse salary recovery” can succeed. In 2023, a civil second-instance judgment disclosed on China’s Court Documents Online showed that Harbin Bank’s Tianjin branch sought performance compensation of nearly RMB 710k from a former branch manager, Zheng (a surname). However, in both the first and second instances, the courts did not support the bank’s appeal request.

The core reason the court rejected the claim was the issue of arbitration limitation periods. Under the “Labor Dispute Mediation and Arbitration Law,” the limitation period for applying for arbitration of labor disputes is one year, calculated from the date the interested party knows that their rights have been infringed.

Tian Lihui told a Jiemian News reporter that, in practice, the following three types of practices are most likely to slip into boundaries that infringe employees’ rights. First, applying the system retroactively. Courts generally hold that compensation clawback rules and regulations do not have retroactive effect, and banks may not pursue employees’ past conduct based on newly formulated or revised systems after the fact.

Second, improper procedures and limitation periods. The limitation period for labor dispute arbitration is one year, calculated from the date the bank knows or should have known that its rights were infringed. The Harbin Bank case already shows that clawback requests filed beyond the arbitration limitation period cannot receive judicial support.

Third, responsibility is recognized without factual support. Some banks, solely because a risk event occurred, “claw back immediately” from employees without establishing a causal relationship between the losses and the employee’s individual performance of duties. Insufficient evidence directly leads to loss of the case. Overall, financial institutions have a low rate of winning in compensation clawback cases, indicating that the proper exercise of power cannot be paid for with the surrender of procedural justice.

Based on past circumstances, one of the situations most likely to trigger disputes over “reverse salary recovery” is when a bank attributes all responsibility for systemic risks or decision-making mistakes entirely to frontline employees.

The risk management department official told a Jiemian News reporter: “If a bank’s risk losses are caused by uncontrollable factors such as macroeconomic downturns and industry cyclical adjustments, but the bank nonetheless shifts responsibility entirely to individual credit approval personnel and claws back their performance, this approach may exceed a reasonable boundary.”

“Reverse salary recovery and clawback must follow the principle of fault responsibility—that is, the subject of the recovery should be employees who have direct or major fault for the occurrence of the risk event. If a bank cannot prove that the employee has fault, or that the degree of fault is minor, then an expanded clawback could constitute an illegal wage deduction.” The risk management department official said.