Global financial markets have become "a monster" that "must be put back in its place", the German president has said, comparing bankers with alchemists who were responsible for "massive destruction of assets".

In some of the toughest comments by a leading European politician since the start of the subprime crisis, Horst Köhler - a former head of the International Monetary Fund - called for tougher regulations and the reconstruction of a "continental European banking culture".

Mr Köhler singled out excessive executive pay, the focus of much public resentment against top managers, as a factor in the subprime crisis and accused bankers of acting irresponsibly.

"The complexity of financial products and the possibility to carry out huge leveraged trades with little [of their] own capital have allowed the monster to grow…also responsible [is] the grotesquely high compensation of individual finance managers."

His comments came as European Union finance ministers and policymakers also on Wednesday ratcheted up the pressure over boardroom pay - describing excessive remuneration as "scandalous" and agreeing to return to the issue at a future meeting, most probably after France assumes the six-month rotating EU presidency in July.

"When we talk about wage moderation and the need to link wage increases with productivity increases, then we also have to say something about levels of remuneration that sometimes don't seem to reflect productivity," said Joaquín Almunia, EU monetary affairs commissioner.

Bankers "have made huge mistakes", Mr Köhler told Stern magazine in an interview to be published on Thursday. Referring to the subprime crisis, he said: "I am still waiting for a clear, audible mea culpa. The only good thing about this crisis is that it has made clear to any thinking, responsible person in the sector that international financial markets have developed into a monster that must be put back in its place.

"We need more severe and efficient regulation, higher capital requirements to underpin financial trades, more transparency and a global institution to independently oversee the stability of the international financial system. I have already suggested that the IMF assume this role."

Mr Köhler's words will revive memories of the 2005 remarks by Franz Muntefering, then the German vice-chancellor, attacked hedge funds as "swarms of locusts" whose "profit-maximising strategies inspired by international competition" posed "a danger to our democracy".

One senior German banker expressed surprise at Mr Köhler's comments. "Yes, we have been at the brink of a systemic crisis but the regulators did step in as they are supposed to. Banking is one of the most regulated businesses there is and we should be careful to call for new regulation."