(Bloomberg) -- Sallie L. Krawcheck, who ran wealth-management divisions at Bank of America Corp. and Citigroup Inc., said risks at complex financial firms could be better managed by giving executives part of their pay in bonds.

Banks, including her former employers, are trading below liquidation value because investors are struggling to determine what returns to expect, Krawcheck said today at the Bloomberg Markets 50 Summit in New York. The complexity of the firms and their regulation obscure their value, she said.

"Regulators are fighting complexity with complexity, rule by rule," said Krawcheck, 47. "It is so complicated, it makes you weep blood out of your eyes."

Wall Street firms have resisted calls to break up by critics, including former Citigroup Chief Executive Officer Sanford "Sandy" Weill, who say that they're too big to manage and put taxpayers at risk. Banks that survived the global financial crisis they helped cause became even larger under government-approved consolidations.

"How do you handle the complexity, break them up?" Krawcheck said. "All of the things we're debating are merely a means to an end," which is finding a way to cut risk, she said.

Giving employees a combination of bonds and equity will moderate risks because midlevel managers with a firmer grasp of risks aren't unduly encouraged to take bad ones, she said. Top executives, directors and regulators have a hard time evaluating risks from their level, she said.

"If you buy a share of equity, you buy it because you want that management team to take risk and have the stock go up," Krawcheck said. Bonds are a "risk-averse instrument, because no matter how much risk they take, you get 100 cents on the dollar if you hold it to maturity."

Compensation should lean more toward bonds as leverage rises, she said. A return to the separation of retail and investment banks created by the Depression-era Glass-Steagall Act isn't realistic because even changes in money-market mutual fund regulations have proven difficult, Krawcheck said.

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