Bankers who take "reckless" risks with investments could be stripped of future bonuses, the government has said.
Plans that are expected to to be outlined in the Queen's Speech will give regulators the power to stop bankers from pocketing big bonuses that could destabilize the financial system.
Treasury Select Committee John McFall told Today presenter Justin Webb that a "radical overhaul" of the rules governing bonuses in the financial services was badly needed.
"It is putting the FSA on the front foot, whereas for a number of years it has been on the back foot," he said.
But former Chairman of RBS Sir George Mathewson said that now was the wrong time to be attacking the industry.
"The FSA probably has enough tools already in order to ensure that bonus systems that could be said to threaten the system should not exist," he said.
"I think it is somewhat sad that, as we are moving out of the recession, it is still seen as a political move to threaten the banks."