Tackle credit crunch 'not bonuses'

September 04, 2009 07:09:26 AM

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Improving the flow of credit rather than curbing bonuses is a priority for the banking sector as it contributes towards economic recovery, the head of Britain's employers' body said on Thursday.

"Let's instead concentrate the debate on the financial issues that really matter to the economy. The first is the availability of credit," Richard Lambert, director general of the Confederation of British Industry told business leaders.

Finance ministers from Group of 20 leading economies meet in London on Friday and Saturday for talks set to focus on ways to limit bankers' bonuses, which are blamed for encouraging risk-taking that led to the financial crisis.

"There are only two questions that really matter in the banking market today, and they are not about bankers' pay and rations," Lambert said in a speech to business leaders in Gateshead, northeast England.

"The right question to ask is: how do we get credit flowing properly through to the private sector, especially to small and medium sized enterprises?

"And what kind of shock absorbers do the banks need to have in place so that they can get off the taxpayers' back, and do what they are supposed to do in a competitive and open marketplace?"

Lambert went on to answer his second question by saying troubled banks can in the future avoid asking for state bailouts by building up their capital reserves.