The Bank of England’s Governor yesterday attacked the “astronomic” pay of top bankers which he said created a culture of reckless gambling in the City that spawned the financial crisis.

Mervyn King spurned pressure from MPs to condemn the £650,000 a year pension to be paid to Sir Fred Goodwin, the disgraced former chief executive of the part-nationalised Royal Bank of Scotland.

The Governor said that he did not want to “jump on the bandwagon of a rather unappealing sort of vengeance” aimed at individual bank bosses.

But he laid into the City’s multi-million pound bonuses, as well as runaway pay for corporate executive earning “vast amounts of money beyond the dreams of ordinary people”, which he said were “very hard” to justify.

“The real question is how was it the case that everyone that it was a good idea that executives should be rewarded in this way,” he said.

“It was a form of compensation which rewarded gamblers if they won the gamble, but there was no less if they lost it. It’s obvious if you do that you will give people incentives to gamble.”

The Governor condemned a wider culture that he claimed had made it “massively difficult” for regulators to challenge excessive risk-taking without being accused of unpatriotic attacks on what had been seen as the success story of the City.

“They would have been seen as arguing against success ... PR machines would have been out in full-force. The Government would have been lobbied. It would have been a lonely job.”

He added: “The lesson I would draw is not to expect too much from the regulators ... It’s very hard to say to someone who appears to be very successful that what you are doing is potentially damaging to the rest of the economy.”

The hard-hitting remarks came as Mr King sought to deflect charges from MPs on the Commons Treasury Committee that the Bank had been persistently been “running behind events” in the crisis.

He pinned much of the blame for events on financial regulators he said were ill-equipped.

But he also took a swipe at Gordon Brown, suggesting that excessive government borrowing before the recession had left it badly boxed-in now over using tax and spending measures to combat the slump.

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