The Liberal Democrats have launched a five-point plan to deal with the excesses of bankers bonuses.
The proposals announced include a regulation to stop any loss-making banks from paying discretionary bonuses, to ensure there are no rewards for failure.
Speaking at a press conference this morning Liberal Democrat leader Nick Clegg said the party's manifesto, to be launched tomorrow, would be setting out anew approach to the economy "based on equity not debt."
"The problems in the British economy started with the banks, so the solution must start with the banks too," he said.
And he said the other parties would not tackle the vested interest in the banking system.
Clegg pledged to "reform banking system in its entirety."
He said the party wanted to get banks lending to viable British businesses.
The five point plan to bring the bonus culture in banking under control, announced by Clegg, is:
1. No cash bonuses, with any bonuses over £2,500 to be paid in shares.
2. No bonuses at all at board level- No bonuses that may "distort their [board directors] judgment."
3. No rewards for failure- eextend the Financial Services Act to ensure that no regulated institution which has made a loss can pay discretionary bonuses.
4. Total transparency- publication of the names of all bank staff that have salaries and bonuses that are greater than the prime minster’s salary.
5. Hold directors to account- extend the powers of the FSA and "bring responsibility home to the directors themselves- to their own pockets."
Clegg said the country could not have a sustainable growing economy as long as incentives in baking industry were "lining the pockets of bankers" instead of offering loans.
Appearing alongside Clegg, Liberal Democrat Treasury spokesman Vince Cable said the country was still enduring a "major economic disaster."
Cable said transparency was an "important principle in corporate law.
Shareholders have a right to know what is going on in their company."
He said that Financial Services Authority has a limited range of sanctions at the moment.
Answering a question from Mike Sergeant, political correspondent for the BBC, on whether the party's proposals will lead to a smaller banking sector, Clegg said the 10 per cent levy is some cases will be only tax banks pay at all.
Sergeant said that the banking sector contributes £100bn to economy, producing revenue for the government and creating jobs. He asked Clegg how the Liberal Democrats will replace the loss.
"We're just going to have to accept that the tax revenue coming from the banks is going to be much, much lower for some time," Clegg said.
Cable said making banks safer may lead to a smaller banking system in relation to the British economy.
He argued that the share of balance sheets (assets and liabilities) is higher in France, Germany and the United States.
Cable argued that, in this context, the danger of banking collapse is much bigger in the UK.
He said we "do have to act on these things."
Rachel Younger, special correspondent for Sky News, commented that the reality of a free trade world means reform cannot work without international agreement.
Cable said international agreement on reform of the sector was desirable but conceded that some things need to be done unilaterally.
Proper regulation means rules governing capital adequacy, Cable explained. He said the Liberal Democrats were proposing more competitive rules.
Agreement on the reforms will take years but in the meantime British banks need to be made safe, Cable added.
Angus Walker, ITV, asked if the party has spoken with the Treasury in theory.
He asked whether the measures would lead to people leaving the country, strangling growth in the process. He said any government would not be forgiven for punishing a sector that produces such huge revenue.
Clegg said "no government should be or could be forgiven" for not having acted on protecting the economy and vested interests of the UK.
On the decision to grant legal aid to three ex-Labour MPs who have been charged over their expenses , Cable said it was the job of the FSA to ensure their rules are not being ridiculed.
Clegg exclaimed that the acts were "outrageous" and "totally incomprehensible".
Adam Boulton, political editor for Sky News, said a shrink in the economy will be a disaster.
Cable argued that the actions will not shrink the economy, adding "we are arguing for better balance".
When asked about the Institute Fiscal Studies comments on Monday regarding the Liberal Democrats claims that the poor pay more of their income in tax than the rich, since 1997, Clegg said he strongly disagreed with the argument.
He said that the Liberal Democrats count benefit as negative taxation.
Presenter of the Daily Politics show on the BBC, Andrew Neill expressed surprise that the party wanted to make economy smaller. He said that despite the downturn, the economy was one of the success stories in the UK.
Clegg said the banking sector was "holding a gun to the head" of the rest of the economy.
Banks have to be fundamentally restructured and reformed, Cable argued.
Michael White, assistant editor at the Guardian asked whether quantitative easing was aimed at bringing balance to banks and stock exchange rather than the economy.
Quantitative easing was a dangerous experiment, Cable said, but one that had to happen.
There was "no other way of forestalling what could have been catastrophe," Cable added.
Alex Barker, reporter for the Financial Times, asked whether banking reform was a priority for the party in the event of a hung Parliament.
Clegg said reform of the banking system is a prerequisite for supporting the economy.
Reform is "absolutely vital," Clegg concluded.
