Margareta Pagano: These bankers don't deserve to keep their jobs

The top executive directors of the eight banks that could take part in the Government's rescue plan were paid £72m between them last year. That's nearly £2m each. Many of them earned far, far more but this is the average. Over the same year, shareholders in most of those banks – namely Royal Bank of Scotland, HBOS and Barclays – have lost their shirts. And let us not forget, the shareholders who invested in Bradford & Bingley and Northern Rock, who have been wiped out by this banking calamity. In those cases, the chiefs left, albeit with big pay-offs.

But, so far, not one of the Big Eight bankers has volunteered to go. They should. You cannot have a society in which those responsible for such errors are not held accountable. Obvious heads that should roll are those of Sir Fred Goodwin at RBS and Andy Hornby at HBOS, both of whom were in denial, until even a few weeks ago, about the amount of capital they needed to survive. Sir Fred is said to be close to offering to stand down as the price to be paid for getting the £10bn of new capital from either the Government or private shareholders. This woud be the right thing to do. Frankly, most of the RBS board should go with him.

I'm not blaming just the bankers – the politicians and regulators, specifically at the Financial Services Authority (FSA), have as much to answer for. Their time will come. But, for now, bankers are the visible face of what has gone so horribly wrong and should suffer quickly and publicly. To date, only one has shown any honour by resigning and apologising for the misfortunes that arose from his mistakes in investing in the US: Jim Sutcliffe, the chief executive of South Africa's Old Mutual.

Perhaps they take a less cowardly view of responsibility overseas. During the banking crises in Norway and Sweden in the early 1990s, it wasn't just the banking bosses who resigned. Entire boards were either sacked, or resigned voluntarily, when their governments stepped in to nationalise the banks. The Japanese took the same attitude during their banking rescues.

But I'm not sure UK bankers have quite got the message. A few days ago, I asked the chairman of one of the biggest banks involved in this rescue package if his bank was changing its pay structures. No, he said, as though I were slightly mad to even be asking the question. Instead, he claimed that if a bank can't pay the top dollar rate for its star traders and bankers, then they will jump ship to another bank – or even another country where regulation is laxer. I don't actually believe this. And if they do go, good riddance. No one is that indispensable. If all the banks took such a tough attitude, you'd soon change the market. And change, after all, is what good markets are supposed to do.

Without doubt, many of the more outrageous incentive schemes exacerbated the reckless borrowing which is now unwinding. Therefore, the challenge is now to change how they are put together. Finding better ways of relating pay to risk is now causing sleepless nights at the FSA, as well as in the Conservative Party, working on its own review of City pay. It's not rocket science. Pay needs to be longer-term, spread wider and deeper in the company and paid out in more shares. Shareholders must be encouraged to take a much more active role in controlling pay levels.

Gordon Brown says cutting bonuses will be a condition of any bank taking part in the rescue scheme. Whether the Government can insist on this is still a moot point, as pay is an issue to be decided by the company and its shareholders. A far better way to exact revenge, while showing the taxpayer who is going to have to pay for the mess, is to persuade many of the top guys at the banks to step down. That will give the public its blood.

As J K Galbraith wrote in his book, The Great Crash, 1929: "As a protection against financial illusion or insanity, memory is far better than law." Words that should be inscribed above the entrance of every bank, the Treasury and the FSA.

Let's not get frosty with the Vikings, they are our natural partners

Britain is making a serious mistake in allowing relations with Iceland to get so frosty. Instead of alienating the Icelanders, we should be working with them to sort out the web of assets owned by their companies in the UK, and the assets held by our councils and savers, and deposited in their banks. Grandstanding politics, like using anti-terrorism legislation to freeze banking assets, and threatening any other action to recover money for UK citizens, looks daft and just a little naive. For several years now, we have allowed the Vikings to invade our high street, while the FSA has been more than happy for the Icelandic banks to offer toppy interest rates to attract our savers despite fears this was hot money.Where were the sabre-rattling regulators then?

Instead of threats, we should be helping bail out the country – either through the EU or by putting pressure on the IMF. Up to now, only Russia has offered hard cash. But there is a catch – one source tells me the Russians have asked for use of the old US airbase at Keflavik, vacated in 2006, as part of the £3bn loan deal. Even if the PM Geir Haarde is using the Russian offer as leverage to attract EU or IMF money, shouldn't we be helping ? Iceland is a natural partner, perfectly placed between the US and northern Norway, not far from the oil-rich Barents Sea and Russia's gas fields. Rather than risking another cod war, this could be an ideal time for Iceland to join the eurozone. As Europe's banks topple like kingpins, it can't be long before we have five or six giants striding across the Continent's borders. Then, you could argue, the EU needs its own Treasury with the authority to rescue banks with no national home. Is this why Gordon Brown and a handful of close advisers are said to be muttering the euro word for the first time in years? It's as remote as, well, Peter Mandelson coming back into the Cabinet. Remember, you read it here first.

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