Bankers' pay needs to be reformed so they are no longer handsomely rewarded for deals that turn bad, says the boss of the world's second biggest bank.
HSBC chairman Stephen Green told the BBC that the banking industry was too focused on short-term profits.
He said that current pay schemes did not reflect long-term performance.
He indicated remuneration was one of the causes of the credit crunch as some staff were paid too much for deals that ended up costing their banks a fortune.
Banks worldwide have lost around $300bn (£170bn) from investments related to the sub-prime mortgage crisis.
Initially these bets on the sub-prime market, which lends to those with poor or patchy credit histories, were very profitable for banks as house prices rose and borrowers repaid their loans.
However, the market for mortgage-based securities turned sour last summer as defaults rose and the value of these investments plummeted. There has been far too much focus on payments that are very short-term focused, people who pick up the tab for short-term profits, without having to bear the costs of long-term impairments," Mr Green said.
He said transactions should be rewarded handsomely only when they had yielded sustainable, long-term profits.
Mr Green, whose bank has its headquarters in Hong Kong, added that compensation levels should be set by the market but that they should be consistent with the long-term interests of the market as a whole and the shareholders of a given institution.
BBC business editor Robert Peston, who interviewed Mr Green for BBC News series Leading Questions, said few bankers had stood up and admitted that remuneration in their industry was one of the causes of the credit crunch - and none had who are as influential as Mr Green.
But our correspondent added: "It's all very well to recognise the need for reform - it's quite another to actually get banks and bankers to sign up for what many of them will see as a pay cut."
HSBC chairman Stephen Green told the BBC that the banking industry was too focused on short-term profits.
He said that current pay schemes did not reflect long-term performance.
He indicated remuneration was one of the causes of the credit crunch as some staff were paid too much for deals that ended up costing their banks a fortune.
Banks worldwide have lost around $300bn (£170bn) from investments related to the sub-prime mortgage crisis.
Initially these bets on the sub-prime market, which lends to those with poor or patchy credit histories, were very profitable for banks as house prices rose and borrowers repaid their loans.
However, the market for mortgage-based securities turned sour last summer as defaults rose and the value of these investments plummeted. There has been far too much focus on payments that are very short-term focused, people who pick up the tab for short-term profits, without having to bear the costs of long-term impairments," Mr Green said.
He said transactions should be rewarded handsomely only when they had yielded sustainable, long-term profits.
Mr Green, whose bank has its headquarters in Hong Kong, added that compensation levels should be set by the market but that they should be consistent with the long-term interests of the market as a whole and the shareholders of a given institution.
BBC business editor Robert Peston, who interviewed Mr Green for BBC News series Leading Questions, said few bankers had stood up and admitted that remuneration in their industry was one of the causes of the credit crunch - and none had who are as influential as Mr Green.
But our correspondent added: "It's all very well to recognise the need for reform - it's quite another to actually get banks and bankers to sign up for what many of them will see as a pay cut."
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