Bank chief raps 'inflated' bonus culture

The head of the UK's biggest bank hit out at the "inflated" bonus culture today and predicted smaller payouts for the industry in future.

Stephen Green, the chairman of banking giant HSBC and the British Bankers' Association, told the Financial Times that the industry "had very good reason to be uncomfortable, looking backwards".

Mr Green, an ordained Church of England minister, said there had been "plenty of distortion" in bank pay which had given rise to "wrong and frankly inflated" bonuses.

But he added: "As this newer environment beds down, I think you will see a market working in a way that we don't need to be ashamed of."

Mr Green's intervention follows the super-tax on bonuses introduced by Chancellor Alistair Darling and an attack on "obscene" payouts by US President Barack Obama - who last week proposed tough curbs on the size and risk-taking ability of banks.

Goldman Sachs last week unveiled a £10 billion pay and benefits pot, but said it had shown "restraint" after limiting the total compensation of its 100 London partners to £1 million.

It is not the first salvo against the banking industry by the HSBC boss, whose book Serving God? Serving Mammon? attempted to reconcile Christianity with financial markets.

Last year he argued that swathes of the banking sector simply lost their moral compass in the "go-go years", causing a "major breakdown in trust".

"It is as if, too often, people had given up asking whether something was the right thing to do, and focused only whether it was legal and complied with the rules.

"The industry needs to recover a sense of what is right and suitable as a key impulse for doing business," he said.