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Nearly eight out of 10 industry people expect further financial institutions to crumble as the credit crunch continues, a survey by Norton Rose has revealed.

According to research conducted by the City law firm, among 195 people 79 per cent of respondents expect more institutions to fail while nearly two thirds have not introduced changes to their bonus structures as a result of the banking sector troubles.

Nevertheless, the majority of the 195 companies questioned in the survey believe the effects of the credit crunch will take more than a year to recover from. Worringly, about 17 per cent of the respondents are certain the impact of the market turmoil will take more than five years to dissipate or will remain permanent.

Looking ahead, 85 per cent predicted increased regulation, 91 per cent forecasted increased consolidation, and 38 per cent expected more state ownership of businesses in the sector.

Respondents revealed that the crisis has had a marked impact on corporate behaviour, as financial institutions have become more conservative in their approach to risk management, according to three quarters of people, to credit approval processes for 70 per cent, and to due diligence, for 47 per cent.

However, almost a third of respondents said they were actively pursuing opportunities in new markets, despite current problems.

Stephen Parish, global head of banking at Norton Rose, said: "What started as a liquidity problem arising from writedowns of mortgage backed securities has been transformed into a much more serious problem".