Angela Knight: Bonuses did not cause the crunch, time to move on

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No matter what we do, bankers' bonuses remain the defining issue of the financial crisis. The public are angry; the politicians are tackling pay controversies of their own; and the banking industry has not been able to secure the confidence of its customers that it is dealing with the issue decisively.

Three months ago, I wrote on my blog that pay is the issue on which the industry would principally be judged. Three months on, the main banks from the UK – and now from overseas too – have committed to consult with the Financial Services Authority before setting pay policies for senior staff; they have signed up to the FSA's subsequent code on remuneration; and they have signed up to the rules agreed at last month's G20 meeting.

We have always said that bonuses need to be tied to the long-term success of a business. Working with our regulatory authorities, we believe the commitment we have now made to this principle is unequivocal and total.

Other pressing regulatory issues need to be addressed. The amount of capital that banks have to hold has effectively doubled in the UK. And these are set to rise even further. That is money we cannot therefore lend as mortgages or loans. The FSA's new liquidity standards, announced last week, will require banks to buy large amounts of government bonds in order to operate. Again, that is money we cannot offer to our customers. We understand countercyclical capital buffers will never hit the headlines in quite the way that bonuses did. But bonuses were not even among the principal reasons of the credit crunch. We do need to reassure bank customers that there will be no rewards for failure in our industry. But we also need to address all of the causes of the credit crunch to ensure it does not happen again. And as we approach a general election, we need to remind the industry's critics in Westminster that, although bank bashing may win politicians votes, it will not keep Britain its jobs.

Angela Knight is chief executive of the British Bankers' Association