John Thain, the new head of Merrill Lynch, has promised to overhaul the bank's bonus system following record Wall Street pay-outs, despite huge losses. Bonuses at the five largest investment banks rose to a new high of $40bn last year even as they reported far more than that in combined mortgage-related asset writedowns.

"It's basically an impossible situation," Mr Thain told the FT. "Most of our businesses had very good or record years. The huge losses were created by a small number of people."