The Bank of England issued a stark warning to the City of London more than a decade ago that big bonuses encouraged traders to take excessive risks – but no action was taken.

The Bank’s financial stability review published in March 1997 warned that large, variable bonuses that depended on some measure of performance could become a one-way bet for traders. Dealers won if they generated profits for the business but did not have to pay back their bonuses if they lost money.