Speaking to the Guardian on Saturday, Osborne said a future Conservative government would legislate to curb excessive bank bonuses right across the financial services industry - in retail banks as well as investment banks.
Business secretary Peter Mandelson has also suggested more needs to be done to tackle pay in the sector, but so far the Conservatives have gone the furthest.
Osborne told the Guardian: "These banks need to live in the real world, where the country's in a deep recession, and where the taxpayer has spent billions of pounds, not just bailing out some failed banks, but also underpinning the rest of the banking system."
"The reason guarantees are in place is not so the bankers can pay themselves large bonuses. They are in place to keep a banking system afloat during a recession, and to allow the banks to rebuild their balance sheets, so they can function again and start lending in a normal fashion.
"If it's the case that banks are using those guarantees and actually engaging in pretty low-risk activity and making huge profits on the back of it, and then paying huge bonuses, I think action needs to be taken."
