Lord Myners: We need to take this action to make the banking system more stable
Bankers who take "reckless" risks with investments could be stripped of future bonuses, the government has said.
City minister Lord Myners said banks must be "more secure", with taxpayers "never again" bailing them out.
The Tories called the measures, which would give more powers to the Financial Services Authority, "headline-chasing".
The British Bankers' Association warned that these changes could threaten the UK's future as a major global centre for finance.
The Financial Services Bill will be part of the Queen's speech - which sets out legislative plans for the coming year - later this week.
Lord Myners said the changes would not involve setting a cap on bankers' bonuses.
But the FSA would get the power to stop excessive payments and to cancel any pay packages which appear to reward undue risk-taking.
The measures would apply only to future contracts.
Lord Myners told the BBC: "We cannot accept the situation in the future where the incentives system in banks was leading them to do reckless things.
The public will be asking what this announcement means for the bonuses that are due to be paid this Christmas - and the answer is nothing at all
Philip Hammond, Conservatives
"So we have to take this action to make the banking system more accountable, more secure and ensure that it never again has to call on the taxpayer to bail it out."
He added: "We are going to make it very clear that contracts which contain bonuses clauses which will add to risk or contracts which guarantee bonuses for several years are no longer acceptable and, if those contracts are written, they will be voided under law."
Last month the Centre for Economics and Business Research said City bank bonuses would hit £6bn this year, up from £4bn in 2008, because of rising profits and less competition.
This caused outcry among some businesses, who urged an improvement in the level of lending available to them.
Angela Knight, chief executive of the British Bankers' Association, told BBC Radio 4's World This Weekend: "The UK has already taken some very strong steps as far as remuneration is concerned, putting the whole remuneration structure into regulation in a way that other countries may talk about but have not yet done.
"The banking industry are at the table for change. We recognise the issues and the need for culture change.
"But looking at legislation, we have to look at the wider context, and that is the UK as the big global centre for international banking that it is, and how it will impact there."
The Conservatives have proposed putting a temporary cap of £2,000 on cash bonuses for staff working for High Street banks.
Conservative Treasury spokesperson, Philip Hammond: "Measures will not be effective"
The party says this will release up to £20bn for lending to individuals and business.
Shadow chief secretary to the Treasury Philip Hammond said the Financial Services Bill looked like "yet more headline-chasing from the government".
He said: "Over a year ago the FSA said they had the power to sign off on the framework and structure of bonuses.
"The public will be asking what this announcement means for the bonuses that are due to be paid this Christmas - and the answer is nothing at all.
"When we announced plans to stop significant cash bonuses being paid this year, the government were quick to criticise before eventually agreeing with us."
He added: "The Bank of England should be put in charge and that is what we shall be pushing for as this Bill goes through Parliament."
Liberal Democrat Treasury spokesman Vince Cable said: "Obviously it is right that if bankers put the country at risk through their behaviour, they should be struck off in the same way that doctors are struck off in cases of professional misconduct.
"Liberal Democrats want much more substantial reform including full disclosure of bonuses and bankers' remuneration packages. Anything above £200,000 should be fully disclosed as it already is for directors."
The Financial Services Bill would also bar financial institutions from encouraging customers to borrow more than they can afford by sending out unrequested credit card cheques.
It would enable bank customers to join forces in class actions to demand compensation for excessive bank charges.
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