* Institute of International Finance meets in London June 4-6
* 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 path to rehabilitation will be thrown into sharp focus this week when politicians, central bankers and bank bosses gather in London - Europe's finance capital and also the site of many of the industry's ills.
Bank bosses say risk-taking has been cut and banking culture is on the mend but critics say more needs to be done to restore trust in an industry blamed by many people for the financial crisis, and to avoid the need for taxpayer bailouts.
Attendees at the annual spring meeting of the Institute of International Finance (IIF), the bank industry's leading lobby group, will meet in London for three days starting on Wednesday.
And they have a warning from International Monetary Fund chief Christine Lagarde ringing in their ears: Changes since the 2007-09 crisis have not been deep or broad enough and bankers still prize "today's bonus over tomorrow's relationship."
Banks have other issues to address as well as their public image. They are restructuring investment banks and cutting costs to improve profitability, many face the threat of hefty fines for past sins, and all are trying to adapt to new technology.
Euro zone banks are also going through a test of their loan books that is forcing many to recapitalise.
Huw van Steenis, analyst at Morgan Stanley, said the industry is adjusting to a "fundamentally different" landscape.
"The dramatic change in regulations, economic backdrop and market structure means banks still have mis-allocated resources. How quickly and successfully banks can optimise and make the tough calls is a huge focus for investors and bankers alike," he said.
A year-long slump in trading revenues has continued in the second quarter as client activity has been deterred by low interest rates, adding to regulatory changes forcing banks to hold more capital and prompting UBS, Barclays and others to shrink and restructure.
Speakers at the IIF event include HSBC Chairman Douglas Flint, UBS Chairman Axel Weber and Chief Executive Sergio Ermotti, Sumitomo Mitsui Chairman Masayuki Oku and Barclays CEO Antony Jenkins.
They will be joined by Vitor Constancio, vice-president of the European Central Bank (ECB), Eurogroup President Jeroen Dijsselbloem and Jon Cunliffe, Bank of England deputy governor, and several top investors, including MetLife CEO Steven Kandarian and Pimco's Richard Clarida.
The IIF has about 500 members, including insurers, hedge funds and sovereign wealth funds as well as banks. About 1,000 people are expected to attend the event, held next door to the British Parliament - in recent years the site of some of the fiercest criticism over bankers' culture and pay levels.
Some politicians, sensitive to public anger, and investors say still more needs to be done to bring down pay levels.
Constancio will speak on Friday, a day after the ECB is expected to loosen monetary policy. The ECB is considering taking its deposit rate negative for the first time - effectively charging banks to park money at the central bank in the hope they will lend it out instead - which could have far-reaching economic and banking implications.
Banks also remain under scrutiny for alleged rigging of benchmark interest rates and foreign exchange markets, and penalties for past misdeeds are on the rise.
BNP Paribas, whose chairman Baudouin Prot is due to speak at the event, could be fined $10 billion or more for allegedly evading U.S. sanctions relating to Iran and other countries between 2002 and 2009, prompting France to say it could defend BNP's interests.
Senior bankers said it could take at least two more years for the industry to work through their legacy problems.
However the IMF's Lagarde warned progress in completing banking reforms - especially how to ensure banks are not "too big to fail" and can be wound down without taxpayer help - was too slow and was being hampered by fierce industry lobbying.
"A lot has happened in the last few years and a lot of things are in the process of implementation, but the financial system is never in a steady state ... it's more like a never-ending struggle," said Nicolas Veron, a senior fellow at Bruegel, the European economics think-tank. (Editing by Pravin Char)