GORDON Brown called for a cap on bonuses as he warned financial institutions were still behaving "reprehensibly" despite the credit crunch.
In a joint letter with French president Nicolas Sarkozy and German chancellor Angela Merkel, the prime minister suggested payments should be limited to a proportion of banks' earnings.
There should also be "claw-back" mechanisms to prevent individ
uals benefiting if their deals went wrong over a longer period of time, according to the leaders.
The missive was sent to Swedish prime minister Fredrik Reinfeldt, who currently holds the presidency of the EU, ahead of the crucial G20 meeting in Pittsburgh later this month.
It insisted European states must send a "strong joint message" on financial reforms at the gathering, and warned that the economic problems were far from over.
"While cyclical indicators point to economic stabilisation, the crisis is not over and the labour markets will suffer the consequences of low capacity utilisation over the months to come," the leaders wrote.
"Together we must send a message from Pittsburgh that we are fully and firmly resolved to implement our stimulus plans."
They went on: "The abatement of financial tensions has led some financial institutions to imagine they can return to the same modes of action prevalent before the crisis. This is not an option.
"Our citizens are deeply shocked at the revival of reprehensible practices, despite taxpayers' money having been mobilised to support the financial sector at the height of the crisis."
They demanded moves towards better governance, more transparency, and longer term bonus schemes.
"We should explore ways to limit total variable remuneration in a bank, either to a certain proportion of total compensation or the bank's revenues and/or profits," the letter stated.
It also insisted there was currently "no alternative" to the fiscal stimulus policies being implemented across the world.
But it added "exit strategies" had to be ready for when the situation changed.
The leaders also called for plans to be drawn up setting out how major financial institutions could be allowed to fail without bringing down the wider system.
"The finance ministers should examine ways to enhance supervision requirements for systemically relevant financial institutions to reflect the level of systemic risk that these banks pose to the financial sector, and how such banks could be wound up if necessary without shaking the financial system," the letter said.
Sanctions against "tax havens" that refuse to cooperate with other governments should also be introduced from March next year, according to the leaders.
G20 finance ministers are due to gather in London this weekend to prepare for the meeting in Pittsburgh.
Mr Brown said he was determined rewards were not based on "short-term speculation".
He said: "It's time to say that we are never going to go back to the old ways.
"Those people who expect that things can be back to normal will not have that. The bonus culture has got to change."
He added: "It's got to be about long-term success, not short-term speculation."
