FSA to curb banker bonuses - Darling

LONDON (Reuters) - City regulators are to be given new powers to stop bankers receiving bonuses that "would cause instability" to the financial system, Chancellor Alistair Darling said in a newspaper interview Sunday.

Speaking to the Sunday Telegraph he said banking needed to change and that financiers had to see themselves as "fellow citizens" who had been bailed out by the taxpayer.

The chancellor said that some of the huge bonuses paid to bankers around the world were viewed by the public as "ludicrous."

"(We will be) giving the Financial Services Authority (FSA) powers if necessary to tear up contracts that would result in payments being made that would cause instability," Darling told the paper.

"I've always been clear that I'm not against people being rewarded for hard work. What has gone wrong is where people were paid to take excessive risk and they were rewarded to do things that ultimately brought the banking system crashing down."

The new rules are contained in the Financial Services Bill to be unveiled in the Queen's speech Wednesday, the newspaper reported.

The regulations will come into force next year if the bill passes through Parliament before the next general election, which must be held before June 3.

The rules will apply to all British banks including partly state owned Royal Bank of Scotland and Lloyds, and Barclays and HSBC.

It will also apply to the British operations of global investment banks like Goldman Sachs.