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LONDON (Reuters) - Britain's financial centre is heading for a new era of conservatism where bankers and fund managers must deliver long-term gains before pocketing big bonuses, said the standard bearer for London's square mile.
Ian Luder, the Lord Mayor of the City of London, is hopeful that the "bashing" of financial sector professionals is giving way to more measured debate -- aided by a shift in public anger to the expenses claimed by lawmakers.
"I actually think we have moved on, we are through with the witch hunting, we may still hear about a famous pension, we will still hear bits about bonuses, but actually the debate is much more focused on the nature of the reform," Luder told Reuters in an interview late on Thursday.
"What we will need to see is payment structures to reflect the needs of institutions, and most institutions need sustained, long-term performance.
"Pay will be phased over a period of time," he said. "We will have to change. Everywhere, not just in banking, there are lessons that people are learning.
One of those lessons is poised to create a new breed of highly-paid financial sector workers, he said.
"If you had asked a class of bright graduates two years ago what they wanted to do, I do not think you would have found many saying: 'I want to be a risk management officer.' In fact I would say you would have found none," Luder said.
"I think you will now see people recognising that actually ... risk control will be an area that people will choose to specialise (in). A good risk controller will be paid well," he said.
Of course, lessons learned can soon be forgotten, but Luder is confident this crisis has cut hard enough and deep enough to spark a sustained change in City thinking.
"I think this was such a serious episode that it will stay longer in the corporate memory," he said.
Luder, a tax partner at Grant Thornton, became the 681st Lord Mayor in November. The unpaid office is elected annually and was first installed by Richard I in the late 12th century.
Luder -- whose forerunners in the role include nursery story favourite Richard 'Dick' Whittington -- is charged with promoting the UK's financial services sector overseas, while advising the government on how it can best serve the interests of the City.
He expects London to take a lead in Islamic finance in spite of recent moves by Paris to steal a march in the sector.
The UK has gradually changed its law and tax regime to accommodate the tenets of Islamic finance, but France has followed suit and touted itself as the host for Europe's first corporate sukuk, or Islamic bond, by October.
However, Luder predicted the French plan will be postponed, leaving London to lead, most likely through sovereign issuance.
"Given the amount the UK government is set to borrow (700 billion pounds over the next five years) I think it is more rather than less likely we will see a sovereign sukuk, I would say sometime in the next 18 months."
"I suspect the first issuance will be modest in size rather than a blockbuster... We will see the UK doing it first."
Luder's bullishness is understandable, given his role, and he also voices confidence that London will remain a hub for the hedge fund industry in spite of considerable competition from other cities.
"A successful hedge fund needs to be where the action is. And I think it is in London rather than Switzerland," he said.
The European Commission last month proposed a draft law that would require hedge funds to register and disclose information on leverage if they want to operate in the EU.
This latest move to regulate the industry has prompted renewed speculation funds might prefer the lakes and easy access to ski resorts offered by the Swiss locations of Geneva, Zug or Pfaeffikon.
"Hedge funds have a role and I think they will continue to have a role. I do not think there will a huge exodus from London," said Luder.
Reporting by Cecilia Valente; editing by Simon Jessop