(RTTNews) - Living wills will be an important supervisory tool in ensuring that banks do not become so complex that they cannot be allowed to fail in a way that is manageable for the rest of the system, Financial Services Secretary to the Treasury, Paul Myners, said Wednesday.

Speaking at the Worshipful Company of International Bankers Dinner in London, Myners said living wills "Will be a vital part of the prudential regulatory toolkit, allowing the FSA to better assess the riskiness of firms, and set their capital requirements accordingly."

He said in the long-term, the impact of this approach is that it should provide incentives for firms to dismantle corporate or capital structures that might have been developed to exploit tax or regulatory arbitrage.

"Regulation has and will play a fundamental role in ensuring the UK financial markets endure and prosper," he said.

Moreover, he said the continued payment of excessive bonuses to bankers would represent a market failure. He urged the British government to regulate pay more closely than already planned.