The billions of pounds paid out in bonuses to City workers each year could come increasingly with strings attached if the Financial Services Authority (FSA) gets its way.

Supervisors at the City regulator have started to scrutinise bank bonus schemes in the past few weeks to see whether they might encourage reckless behaviour.

Those banks that fail to come up to scratch will have to reform their bonus arrangements or will be obliged by the FSA to hold additional capital.

Remuneration experts said that they expected to see more bonuses paid out in deferred form, probably in shares that cannot be sold for several years, in order to align the interests of employees more closely to those of long-term shareholders.

It is also more likely that employees would be rewarded according to the risks taken in achieving profit targets, as well as the absolute level of profits achieved.

Workers in low-risk areas, such as wealth management, would perhaps get more of the overall profits pool, while those making higher-risk profits in proprietary trading or structured products, say, would get less.

Lord Turner of Ecchinswell, the chairman of the FSA, said that the regulator would be asking firms searching questions about the nature of bonuses as there was a danger that traders were being rewarded for profits that turned out later to be “illusory”.

Lord Turner said: “There are some very important issues about the time periods over which bonuses are paid, the information on which they are measured, which are legitimate issues for regulators to be quizzing banks.”

Sir Callum McCarthy, his predecessor, said in June that the FSA would be adjusting its assessment of the prudential requirements, including capital, for a bank according to its bonus arrangements.

However, as the furore surrounding the management of banks and the payment of asymetrically structured bonus schemes has intensified, some trade unions and politicians have called for more radical reform.

Derek Simpson, joint general secretary of the Unite trade union, said that the bonus system was “out of control” and the reckless behaviour of bankers was wrecking lives.

Mr Simpson said: “These people want ordinary people to share their pain, but they won't share their gain. If you can't regulate the bonus culture, then tax it out of existence.”

Bonuses have long represented the bulk of remuneration for senior City people, dwarfing their base pay.

According to the Centre for Economics and Business Research, £8.5 billion was paid out in bonuses last year. Payments are likely to be down this year, but bonuses will be paid. Goldman Sachs and Morgan Stanley traditionally kick off the season in early December. Most bonuses are set and paid out in the following four months.

Institutional shareholders do share some of the concern about bonus structures but are much more cautious about how they can be reformed without “scaring off the talent” or hurting London as a financial centre. Peter Montagnon, director of investment affairs at the Association of British Insurers, said there was only a limited amount that investors could do.

Mr Montagnon said: “UK shareholders have no locus beyond the remuneration of directors.” The biggest City bonuses often are earned below board level by stars and “rainmakers” in trading and merger advice.

“Remuneration structures have played a very important part in all this [the financial crisis], but there has always been a limit on what UK shareholders can do. Our contribution is constrained,” he said.

David Paterson, head of corporate governance at the National Association of Pension Funds, said that it was the responsibility of bank board remuneration committees to ensure that bonus structures were appropriate.

“This should be achieved by making sure incentives and bonuses are harmonised with the stated objectives of the banks and their shareholders,” he said.

Some pay specialists questioned whether deferred shares would make any difference in curbing reckless behaviour. Lehman staff were famous for having huge chunks of their wealth invested in the business.

Some headhunters questioned whether anything would change.

“You'll see a bit of restraint for a while,” one said, “but why should anything change when the asset management firms [through which the banks are owned] enjoy exactly the same short-term reward structures?”

Matthew Osborne, of Armstrong International, the consultants, said that deferred bonuses were already common, with banks typically paying 50 per cent of bonus in stock vesting over three, or even five years.

“I can't believe they are going to go to 100 per cent stock,” he said.

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