* Institute of International Finance meets in London June4-6
* Bank bosses, central bankers, politicians due to attend
* Banks still restructuring as regulations, economics change
* Threat of fines for past conduct hangs over industry
By Steve Slater
LONDON, June 4 (Reuters) - How far banks are along the pathto rehabilitation will be thrown into sharp focus this week whenpoliticians, central bankers and bank bosses gather in London -Europe's finance capital and also the site of many of theindustry's ills.
Bank bosses say risk-taking has been cut and banking cultureis on the mend but critics say more needs to be done to restoretrust in an industry blamed by many people for the financialcrisis, and to avoid the need for taxpayer bailouts.
Attendees at the annual spring meeting of the Institute ofInternational Finance (IIF), the bank industry's leading lobbygroup, will meet in London for three days starting on Wednesday.
And they have a warning from International Monetary Fundchief Christine Lagarde ringing in their ears: Changes since the2007-09 crisis have not been deep or broad enough and bankersstill prize "today's bonus over tomorrow's relationship."
Banks have other issues to address as well as their publicimage. They are restructuring investment banks and cutting coststo improve profitability, many face the threat of hefty finesfor past sins, and all are trying to adapt to new technology.
Euro zone banks are also going through a test of their loanbooks that is forcing many to recapitalise.
Huw van Steenis, analyst at Morgan Stanley, said theindustry is adjusting to a "fundamentally different" landscape.
"The dramatic change in regulations, economic backdrop andmarket structure means banks still have mis-allocated resources.How quickly and successfully banks can optimise and make thetough calls is a huge focus for investors and bankers alike," hesaid.
A year-long slump in trading revenues has continued in thesecond quarter as client activity has been deterred by lowinterest rates, adding to regulatory changes forcing banks tohold more capital and prompting UBS, Barclays and others to shrink and restructure.
BIG NAMES
Speakers at the IIF event include HSBC ChairmanDouglas Flint, UBS Chairman Axel Weber and Chief ExecutiveSergio Ermotti, Sumitomo Mitsui Chairman Masayuki Okuand Barclays CEO Antony Jenkins.
They will be joined by Vitor Constancio, vice-president ofthe European Central Bank (ECB), Eurogroup President JeroenDijsselbloem and Jon Cunliffe, Bank of England deputy governor,and several top investors, including MetLife CEO StevenKandarian and Pimco's Richard Clarida.
The IIF has about 500 members, including insurers, hedgefunds and sovereign wealth funds as well as banks. About 1,000people are expected to attend the event, held next door to theBritish Parliament - in recent years the site of some of thefiercest criticism over bankers' culture and pay levels.
Some politicians, sensitive to public anger, and investorssay still more needs to be done to bring down pay levels.
Constancio will speak on Friday, a day after the ECB isexpected to loosen monetary policy. The ECB is consideringtaking its deposit rate negative for the first time -effectively charging banks to park money at the central bank inthe hope they will lend it out instead - which could havefar-reaching economic and banking implications.
Banks also remain under scrutiny for alleged rigging ofbenchmark interest rates and foreign exchange markets, andpenalties for past misdeeds are on the rise.
BNP Paribas, whose chairman Baudouin Prot is dueto speak at the event, could be fined $10 billion or more forallegedly evading U.S. sanctions relating to Iran and othercountries between 2002 and 2009, prompting France to say itcould defend BNP's interests.
Senior bankers said it could take at least two more yearsfor the industry to work through their legacy problems.
However the IMF's Lagarde warned progress in completingbanking reforms - especially how to ensure banks are not "toobig to fail" and can be wound down without taxpayer help - wastoo slow and was being hampered by fierce industry lobbying.
"A lot has happened in the last few years and a lot ofthings are in the process of implementation, but the financialsystem is never in a steady state ... it's more like anever-ending struggle," said Nicolas Veron, a senior fellow atBruegel, the European economics think-tank. (Editing by Pravin Char)