MPs condemned pay policies in the Square Mile as "fundamentally flawed", saying they are not aligned with the "interests of shareholders and the long-term sustainability of the banks".
West Dunbartonshire MP and committee chairman John McFall said: "Bonus-driven remuneration structures led to a lethal combination of reckless and excessive risk-taking."
The committee also said the Financial Services Authority's Turner Review had downplayed the role City bonuses played in the banking crisis.
It called for an overhaul of non-executive directors' oversight, saying that at present, many non-execs do not commit enough time to the role, do not have the necessary banking expertise and are drawn from too narrow a talent pool to be effective.
The committee's report also calls for an end to bankers "acting in a vacuum" at "ownerless corporations" by improving shareholder engagement with institutional investors and also proposes that auditing firms be prohibited from carrying out non-audit work for the same institutions.
The select committee's inquiry into the bank crisis took evidence from over 100 witnesses.