(CNN) -- Barclays chief executive Bob Diamond says he expects levels of compensation across the banking sector to be down this year, but has defended large bonuses as "pay for performance."
Speaking to CNN anchor and correspondent Richard Quest at the World Economic Forum in Davos, Diamond addressed the criticism leveled at the banking sector for its high salaries and bonuses during a time of austerity and bailouts.
"I think getting some of the emotion out of this is healthy," said Diamond. "It's about pay for performance. I hear a lot of people talk about the eradication of pay for failure -- we support that. No-one wants to see pay for failure.
"But every time I hear a political leader mention the eradication of pay for failure, I'd like to also hear them talk about rewards for success."
Diamond said that, on the pay issue, it was his job as a chief executive "to balance being responsible, sensitive to the public mood, with being competitive."
He said he was "a bit more positive about 2012" than many others, given that "people are expecting the worst."
"I think in Europe, the activity in Ireland and Portugal and Spain, particularly in Spain with the new administration in terms of... reducing the public spending, has been ahead of what we would have expected."
But he criticized policymakers for being "behind the curve" in addressing the financial crisis,saying there was ample "room for improvement."