No return to bad old days for banks, EU chief warns

Michel Barnier, who is in charge of a regulatory overhaul of banking in the EU's 27 countries, told an industry conference on Monday: "Everyone has to realise that the profit levels seen before the crisis are a thing of the past."

Mr Barnier's warning will likely worry investors, many of whom are already reluctant to buy shares in an industry that faces severe cuts in profit and pay after it helped to trigger a global economic slump.

The 59-year-old former French foreign minister plays a big role in breaking the mould of banking in Europe with legal restrictions that many hope will return the industry to its roots of no-frills lending.

"We need our citizens to believe we are taking the action necessary to create a new financial architecture," said Mr Barnier.

"A financial system that is the heart of jobs and growth, and one that serves them – not the other way round."

His remarks to an audience that included senior officials from the United States Treasury Department, come amid rising political pressure in Washington and Brussels to clamp down on banks.

One important measure planned globally will require banks to set aside more capital for unpaid loans or the other fallout of an economic dip.

On Monday, one of the European Parliament's top lawmakers rounded on banks for attempting to block new rules that will require them to claw back more of their earnings to cover such risks.

The European Parliament has a powerful say in signing off laws alongside the bloc's countries.

"There are two banks that have lobbied very hard on this issue because they say they would need to increase their capital levels by 7 to 10 times," said Arlene McCarthy, a socialist who is key in shaping rules about how much capital is needed to cover such risks.

"If they need to increase their capital by seven to 10 times, they are severely under-capitalised," said Ms McCarthy.

"That's not a situation we need to tolerate.

"Those two banks have paid out the biggest bonuses."