CITY bankers are on a collision course with politicians over multi-million pound bonuses after chancellor Alistair Darling yesterday pledged to intervene to curb excessive pay and risk-taking in the Square Mile.<br /><br />The Treasury is ready to consider legal action on bonuses if they pose a &ldquo;systemic risk&rdquo; to the banking system, which Darling and many other politicians believe has been jeopardised by the culture of big payouts.<br /><br />Darling yesterday said he understood public anger over the issue and that if tougher legislation was required, ministers would act. <br /><br />The Financial Services Authority (FSA) could be given powers to control bonuses in all of Britain&rsquo;s banks.<br /><br />Last week FSA head Hector Sants rejected accusations that the City regulator had watered down its new code on bank pay, arguing that it was not his job to limit bankers&rsquo; pay but the government&rsquo;s.<br /><br />Darling&rsquo;s pledge comes as Barclays attempts to recruit five investment bankers from JP Morgan with a bonus package worth up to &pound;30m. Barclays Capital is understood to be trying to hire one of the City&rsquo;s star commodity traders, Todd Edgar, and a team of four of his colleagues from its rival.<br /><br />The deal &ndash; which is one of the most generous recorded since the financial crisis forced the government to pump billions of pounds into the flagging banking system &ndash; has fuelled the widespread criticism of bonuses by politicians. Shadow chancellor George Osborne attacked the bonus culture this weekend, saying it was &ldquo;unacceptable&rdquo; even for banks that were not owned by the taxpayer, and pledging that a Conservative government would seek to stop the payment of large bonuses. <br /><br />The attack comes after the scale of the bonus culture in Britain&rsquo;s banks was laid bare by Office for National Statistics figures showing that &pound;7.6bn of bonuses were paid in the City between December and April. However, that is down 40 per cent on the same period of 2008.<br /><br />Backers of the FSA&rsquo;s code including the British Bankers Association (BBA) say that the rules are already the toughest in the world and warn that they risk sparking an exodus of talent to more flexible financial centres.<br /><br />Other commentators have given a more measured reaction to the FSA code and its stance on bonuses.<br /><br />Tullet Prebon chief executive Terry Smith, writing in today&rsquo;s Daily Telegraph newspaper, says: &ldquo;The populist assault on bonuses has already produced some bizarre results, such as some banks increasing basic salaries in expectation of not being able to pay bonuses. This unintended consequence of the bonus assault is ridiculous.&rdquo;<br /><br />He adds: &ldquo;I would like to see the government exit the stakes it has taken in the Royal Bank of Scotland and Lloyds at a profit and the only chance of that happening is if these banks are able to retain the key staff who are able to make those banks viable once again. That will require performance bonuses.&rdquo;<br /><br />Writing in CityA.M. today, Stuart Fraser, policy chairman at the City of London Corporation, said: &ldquo;It is vital that regulators resist the urge to adopt an excessively punitive approach towards remuneration.&rdquo;<br /><br />He added: &ldquo;Bankers&rsquo; pay packets should reflect performance and not be recklessly guaranteed across lengthy periods. Consequently, limiting bonus guarantees to 12 months and ensuring that senior employees see two-thirds of their bonuses spread over three years, will ensure that institutions do not take unnecessary risks in their remuneration <br />practices.&rdquo;