Richard Lambert, director-general of the Confederation of British Industry (CBI), made the comments during a speech at Bloomberg in London.
He told attendees: âIf trust has to be built on a sense of fair dealing, then the combination of pay freezes and job losses in the public sector with large bonuses in the City would be toxic in the extreme.
âThis exceptional combination of circumstances will require exceptionally sensitive handling, preferably with the major global institutions acting collectively when it comes to compensation matters, and resisting the temptation to poach disaffected mega stars.â
Mr Lambert warned that if banks do not to take any action on bonuses, it could be seen as âarrogant and out of touchâ.
Meanwhile, European regulators have recently published a new set of regulations surrounding the payment of bonuses.
The Committee of European Banking Supervisors (CEBS) outlined proposals which included tying bonus in with base annual salaries, paying bonuses in forms other than cash and introducing a cap on how much can be paid out.
Jon Terry, reward partner at PricewaterhouseCoopers, said: âThe CEBS guidance makes the European regulation of banking pay among the most stringent and it confirms the extension of the provisions to the world-wide operations of European banks.
He added that the proposals will come as âa huge disappointment to the European Banking industryâ.
By Jim Ottewill