On the scale of the most derided professions, bankers fall several ranks below politicians, journalists, estate agents and the people who phone you during dinner to sell you double glazing. In calling for a temporary limit on the cash bonuses that commercial banks can pay employees, George Osborne, the Shadow Chancellor, is not likely to risk a public backlash.

But the issue that the Tories raise is more fundamental than just the monetary rewards of bankers. The commercial banks lend directly to retail customers and businesses. Mr Osborne argued for measures that would deter these banks from engaging in higher-risk activities. He proposed higher capital requirements for banks that trade securities for their own books, thus increasing their costs.

Critics charge that this is too limited a response. The commercial banks enjoyed big rewards while the markets were going up, and have imposed huge public costs when their financial bets turned sour. As Mervyn King, Governor of the Bank of England, argued last week, banks took big risks because they knew they would be bailed out: they were too big to fail. To prevent commercial banks from threatening financial stability, there is a good case for breaking them up and separating their activities.

The case for the prosecution is this. Financial bubbles are a feature of capitalism. From the Dutch tulip craze of the 17th century to the dot-com mania of the end of the 20th, speculative excess has imposed lasting costs. But the credit bubble of the past decade is unlike any predecessor. Its collapse has wreaked destruction not on a particular asset class, but on the whole economy.

The causes of the chaos are much debated. But the agents are known. They are banks. Believing that they were engaged in sophisticated financial engineering, they took on risks about which they were perfectly clueless. They all but took the entire Western financial system down with them. Had it not been for the involuntary largesse of the UK taxpayer, Northern Rock and Royal Bank of Scotland would not now exist. And the greatest irony of the fiasco is that the banking system was undermined not, as doomsayers expected, by unregulated hedge funds, but by the most regulated part of the financial system: the commercial banks. If they are to have an implicit guarantee in future, then they should be prevented from engaging in activities that put savers’ deposits at risk. Investment banks can take on the risky activities but pay the costs if they fail.

The problem with separating banking functions like this, however, is that it is difficult to know where retail banking ends and investment banking begins. A modern bank is involved in making markets for some contracts, and must thereby take a position in those instruments. It would be wrong to constrain banks from taking any risks. The Tory approach of increasing the costs of trading activities that are not directly for customer business is limited but practicable.

The most urgent reform in the banking sector, however, is in the quality of the boards. They must understand that a bank is not like other businesses in a market economy. Banks have a responsibility not only to generate profits for shareholders, but also to protect depositors and maintain financial stability. That ethos has been absent from the banks. It must be rediscovered.