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Bankers are facing the threat of a new crackdown on their bonuses after Lord Mandelson made clear the Government was unhappy with the City regulator's watered-down plans.
The Business Secretary signalled that guidelines issued by the Financial Services Authority failed to reflect public anger over the credit crisis.
The peer hinted fresh legislation may be needed as the guidelines could allow banks to return to "business as usual" despite receiving billions of pounds of state support.
"Excessive risk-taking had the results we saw. Ordinary businesses are paying the price," he said. "We have not heard the last word on this subject."
The FSA, criticised for its own failures in the near collapse of the financial system last October, watered down its plans this week after warnings from banks that its proposals would lead to an exodus of talent.
It stepped back from forcing banks to spread bonuses over three years.
Hector Sants, the FSA chief executive, hit back at "politicians looking for soundbites" yesterday and said it was not his job to "place pay caps on individuals" for social reasons.
Treasury sources say they are still "pursuing all options" to clamp down on excessive and risky bonuses and may introduce new rules in the forthcoming Financial Services Bill.
