Reforming UK banking through regulation is not enough and a fundamental rethink of how banks are structured is needed, the Bank of England governor has said.

Some banks may have to split their core business from riskier practices, so they do not get too big to be allowed to fail, Mervyn King said in Edinburgh.

The UK government and G20 leaders want to cut banks' risks through regulation and making them hold more capital.

But Mr King said it was a "delusion" that this alone would stop failure.

closer to reality .....

President Obama's pay czar Kenneth Feinberg is set to order that compensation for 175 employees at seven US firms that received bailout funds is cut by half. The cash portion of salaries for the 25 highest paid bankers will be cut by 90 per cent; others will see their bonuses tied to long-term performance.

Some of Feinberg's toughest measures are reserved for employees of AIG's financial products unit, the arm widely held responsible for billions in losses and the firm's near-collapse.

AIG employee compensation will be limited to $200,000. The vast majority of salaries at firms under Feinberg's special master of compensation purview, including Bank of America, Citigroup, General Motors, will come in at under $500,000.

Any executive seeking more than $25,000 in special perks - like country club memberships, private planes, limousines or company cars - will have to apply to the government for permission.

The latest measure come days after Feinberg ordered Bank of America CEO Ken Lewis to receive no 2009 salary, while Citigroup will not have to pay its top trader close to $100m since it agreed to sell the unit he works for.

The draconian measures come as some Wall Street banks prepare to hand out near-record bonuses at the end of the year, triggering a wave of populist outrage.

http://www.thefirstpost.co.uk/55039,news-comment,business,pay-czar-feinberg-shocks-wall-st-with-salary-cuts?DCMP=NLC-daily

Earlier this week, the Centre for Economics and Business Research said City bank bonuses would hit £6bn this year, up from £4bn in 2008, because of rising profits and less competition.

The duke, who has acted in his trade role since 2001, said: "I don't want to demonise the banking and financial sector. Bonuses, in the scheme of things, are minute. They are easy to target.

"A number will have abused their privilege of a bonus, so get rid of the excesses, but don't throw the baby out with the bath water."

In a wide-ranging interview, he also commented on the "difficult" war in Afghanistan and called on the public and government to be more vocal in supporting British troops.

The former Fleet Air Arm helicopter pilot in the Falklands War said soldiers needed more reassurance from their leaders.

The duke said: "They are being remarkably more successful at it than is being adequately communicated."

Mr McFall said he should be more cautious about getting involved in such a controversial issue as bank bonuses.

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bank bonuses equal fairy dust... see toon at top

from the NYT

Goldman Sachs Alters Its Bonus Policy to Quell Uproar

By JENNY ANDERSON 4:43 PM ET
The investment bank announced Thursday that its top executives would be paid in the form of a special stock, rather than in cash....