In a letter to Myners, Knight said the financial sector should never be a burden on society and was working on regulatory changes to shift the burden from the taxpayer to the banking industry.
The letter was a response to the Treasury’s discussion paper, called Risk, Reward and Responsibility, which also outlines steps taken to strengthen the banking system.
Knight says: “No institution should be regarded as too important to fail. The banking industry is engaged with Government and the regulatory authorities in a landmark reform programme, not only to avoid such problems occurring in future but also putting in place arrangements so that every bank has its own special recovery plan.
“We have to balance these regulatory requirements – and the increased costs that result – with the need to sustain lending as we emerge from recession. The UK banking industry is at the table for change, but these are big changes and the cost is very significant. As we schedule these reforms we must ensure we balance the effects of cumulative change with the need to support the wider economy.”