LONDON (AFP) - The world financial crisis is closely linked to bankers' bonuses, which "encouraged excessive risk taking," the Independent quoted Nobel Prize-winning economist Joseph Stiglitz as saying Monday.
 
"The system of compensation almost surely contributed in an important way to the crisis," he said in comments published by the newspaper.

"It was designed to encourage risk-taking -- but it encouraged excessive risk-taking. In effect, it paid them to gamble. When things turned out well, they walked away with huge bonuses. When things turn out badly -- as now -- they do not share in the losses.

"Even if they lose their jobs, they walk away with large sums."

Bonuses paid out in the City of London financial district will top six billion pounds (7.7 billion euros, 12 billion dollars) this year, despite bank failures and write-offs amounting to 60 billion pounds, the paper said.

"The solution is not so much to cap the bonuses, but to make sure that they share the losses as well as the gains -- for instance, holding the bonuses in escrow for 10 years; if there are losses in the second or third or fourth years, the bonuses would be reduced appropriately," Stiglitz said.

The former World Bank chief economist, who won the Nobel in 2001, also said that regulators "were clearly not doing what they should have been doing" in the run-up to the crisis.

The regulations "have not kept pace with innovations in financial markets," he added.