The EU Internal Markets Commissioner has said a fundamental overhaul of the regulatory and supervisory structure of banks is an imperative.
Speaking in Dublin, Charlie McCreevy also said the structure and timing of performance pay in banks must be more closely aligned to long-term shareholder interests and stability.
He said 'misaligned incentives' had been a particular problem in the banking industry. Incentive structures, he said, had been designed for short-term gain, a situation that would have to change.
More positively, Mr McCreevy predicted the economic woes here could be overcome with the appropriate intervention by the authorities.
But he warned that tighter regulation of the financial system into the future would cost more - a cost EU government's, including our own, would have to bear.
Earlier, the commissioner said the imposition of conditions on state bail-outs was a short term political reaction that would stir up protectionism and create new barriers in the internal market. He said the EU Commission was working to ensure that any national measures taken by EU member states complied with their EU Treaty and international obligations.
