Bank of England governor Mervyn King has warned that the high bonuses awarded to staff in the finance industry was draining talent from other sectors.
Speaking in front of the Treasury Select Committee, King credited some of the blame of the current financial climate to the compensation system of banks.
He said that these financial institutions were “paying the price” for rewarding huge risk-taking with the promise of large bonuses, and called for City institutions to change the way they paid their staff.
“I do think it is rather unattractive that so many young people when contemplating careers look at the compensation packages available in the City and think that these dominate almost any other kind of career,” said King.
“It’s not a very attractive situation that such a high proportion of our talented young people naturally look at the City and think it is the only place to work. It shouldn’t be. It should be one of the places, but not the only one,” he said.
Kings criticism follows a similar tirade from CBI boss Richard Lambert recently, who argued that the bonus culture which had turned many bankers into millionaires, was one of the chief causes of the current financial crisis.
Lambert added that while bonuses rewarded success, they did not penalise failure.