Robo-signers. Tax evasion. Money laundering. Dark pool trading. 

Traders like the London Whale, who lost billions of dollars with a few clicks of a mouse and no one noticed until it was too late. Banks colluding to fix LIBOR, the most important interest-rate benchmark in global finance. And, of course, the whole subprime-mortgage thing that almost collapsed the global financial system. 

I could go on. We all know the stories. We all know the consistent and continued breaches of ethics at the world's largest financial institutions.  

A reckoning
Last week in New York, regulators, led by Federal Reserve of New York President William Dudley, drew a line in the sand: Get your corporate cultures in line, or regulators are going to do it for you. The regulators in attendance were not there to make friends. They were there for a reckoning.

What exactly does a line in the sand look like? Dudley put it this way: "If those of you here today as stewards of these large financial institutions do not do your part in pushing forcefully for change across the industry, then bad behavior will undoubtedly persist. ... If that were to occur, the inevitable conclusion will be reached that your firms are too big and complex to manage effectively."

In other words, get your people in line, or the government is going to do it for you. Dudley even went so far as to outline exactly the kind of measures regulators could take to curb or punish these executives if problems persist.

1. Work now, get your bonus in 10 years
First, regulators could drive a wedge between Wall Street bankers and what they care about most -- money. Executives today typically receive their bonuses as deferred equity. Yes, it's millions of potential dollars, but these businessmen can't touch it for a few years. The idea is to align the executives' pay with long-term success; typically these bonuses become available three to five years in the future. To Dudley, five years may not be long enough. In fact, he suggested that 10-year deferrals may make more sense in today's boom-and-bust economic cycle: "Given recent experience, a decade would seem to be a reasonable time frame to provide sufficient time and space for any illegal actions."

Can't you just see these well-heeled Wall Streeters squirming in their seats?

2. Forget equity, meet the performance bond
Those same bonuses are also generally some form of equity. In theory, this approach aligns executive compensation with shareholders. Dudley proposed that regulators could require these bonuses to be changed to a form of debt, such as a performance bond. 

From the regulators' perspective, this change would shift the pay incentive from one of greed to one of fear. In the event of misconduct that results in a fine, all or part of that fine could be paid out from the pool of cash that supports the bond: "This would increase the financial incentive of those individuals who are best placed to identify bad activities at an early stage, or prevent them from occurring in the first place,"

3. Lower-level employees aren't free from culpability, either
Bad apples aren't always at the top of these institutions, the London Whale trader being a great example of a lower-level employee whose behavior cost billions.

Dudley suggested that a "central registry" could be created for all lower-level employees. Financial institutions would be required to report misconduct of specific employees to the registry so that future employees would screen potential hires. Think of it as an ethical credit report for finance-industry employees: "It would be helpful if financial firms, prior to making a hiring decision, could look up a candidate's ethics and compliance score that reflects the individual's past performance at other financial firms," 

A line in the sand
Many industry insiders left the conference a bit shell-shocked. Others, though, pointed to the difficulty in implementing any of these potential new regulations. 

To me, Dudley's words weren't about implementing new regulatory rules today, or this year, or even next year. This conference was a shot across the industry's bow. It was intended to be a harsh wake-up call. 

The banking industry has made great progress over the past several years improving the stability of the financial system, but work remains. "Too big to fail" is a persistent problem. Seemingly like clockwork, big banks find themselves in the news every few weeks with a new scandal or the re-emergence of an old one. 

In the long term, the answer lies in improving the culture at these institutions. Banks are managed by people, and those people are the solution. Dudley put it best himself: "It is up to you [bank executives] to address this cultural and ethical challenge. So let's get on with it."

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