While capping bonuses for bankers has been a hot-button issue in Europe this year, the head of the Bank of England said this week that new regulations may be needed to target the fixed pay of bankers.

Mark Carney, governor of the Bank of England and chairman of the Financial Stability Board, said in a speech in Singapore that new European Union rules placing a cap on banker bonuses has had the “undesirable side effect” of limiting the scope of remuneration that can be cut back. The U.K. is fighting the bonus cap, which limits bonuses to 100 percent of fixed pay or 200 percent with shareholder approval, in the EU’s high court.

“This makes the case for additional reforms to ensure that the burden of excessive risk-taking and misconduct by staff can still be borne by those staff,” Carney said. He pointed to new rules in the U.K., which defer the payment of bonuses for three years and allow clawback for up to seven years after payment. Bonuses can be cut or clawed back if it turns out the employee engaged in misconduct or there were failures in risk management. The U.K. is considering extending deferral periods, widening the scope of those on the hook for poor performance or risk management, and implementing tools to prevent firms from skirting the rules, Carney said.

“Standards may need to be developed to put non-bonus or fixed pay at risk,” Carney said. “That could potentially be achieved through payment in instruments other than cash. (Federal Reserve Bank president and CEO) Bill Dudley’s recent proposal for certain staff to be paid partly in ‘performance bonds’ is worthy of investigation as a potentially elegant solution.”

Carney said people were rightly upset that so many senior executives who sowed the seeds of the crisis walked away unscathed. Carney said compensation schemes in the industry focus too much on the present, encouraging what he called imprudent risk taking and short-termism.

“Leaders and senior managers must be personally responsible for setting the cultural norms of their institutions. But in some parts of the financial sector the link between seniority and accountability had become blurred and, in some cases, severed,” Carney said.

Public trust in financial markets has been sorely tested, Carney said, pointing to taxpayer-funded bail-outs and “egregious examples of misconduct and rigging of markets.” He pointed to the $3.3 billion fines doled out by regulators last week for six banks relating to FX market rigging.

The “misconduct went on long after banks had already been fined for abusing interbank interest rate benchmarks,” Carney said. “The repeated nature of these fines demonstrates that financial penalties alone are not sufficient to address the issues raised. Fundamental change is needed to institutional culture, to compensation arrangements, and to markets.”

Carney pointed to the work by the FSB to develop principles and standards for compensation practices, and spoke of the need for a level playing field internationally.

“Senior manager accountability and new compensation structures will help to rebuild trust in financial institutions,” Carney said.

Carney also pointed to a markets review under way in the U.K., looking to prevent market collusion, benchmark manipulation, and other misconduct. He said the review already has recommended placing more market benchmarks under the purview of U.K. law, and criminalizing benchmark manipulation.

While already agreed upon reforms have made the financial system safer, simpler, and fairer, Carney said, more work needs to be done. Future reforms need to focus on financial diversity, trust, and openness.

“This is a daunting agenda and some might feel that, having apparently reached the finish line, the race has been extended. Indeed, there will be inevitable calls by some vested interests to turn back,” Carney said. “To give in, to drop out, would be a tragedy.”