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* Chairman insists banks play vital role in recovery
* Says Barclays working on adjusting compensation
* Sees Sumitomo sale of Barclays stake as a one-off
* Says easy money cannot continue indefinitely
By Randall Palmer and Louise Egan
MONTREAL, June 10 (Reuters) - Barclays PLC ChairmanDavid Walker hit back on Monday against what he said has becomethe "political and media industry" of badmouthing banks andbankers, and insisted on banks' vital role in a free-marketeconomy.
"The persistence of hostility to banks and bankers, muchmore marked in Europe than elsewhere, is in my view seriouslyunhealthy," he told the economic Conference of Montreal.
"The function of banking needs to be recognized as a keycontributor to recovery in a developed world, in which credit isprincipally extended through the banks and the market ratherthan through state-run conduits."
Barclays, Britain's second-largest bank, and the bankingindustry in general have been under pressure for their role inthe recent financial crisis. Barclays has been told to rein inpay for top staff and to tighten control of its operations aftera string of scandals.
Asked by a reporter if Barclays has made progress in pushingpay packages down, Walker said: "We are determined to remaincompetitive. How we will do it is, as you can imagine, somethingwe've got a huge amount of work on, in common with others whoare in a similar position."
Walker also said the sale by Japan's Sumitomo Mitsui BankingCorp of about half its stake in Barclays did not meanother major shareholders were likely to follow suit.
"My understanding is that for a long time Sumitomo haveindicated that it was their intention at the right time toreduce their holding, and they've now done so; but I don't thinkit has implications for any other holders," he said.
On another corporate matter, he said Barclays was nowworking on a short list of candidates to replace its financedirector, Chris Lucas. He said he "would be very disappointed"if the new person was not in place by aroundyearend.
Barclays also cautioned that the "current very relaxedmonetary policy stance" in the United States, Britain and theeuro zone was in response to a crisis and could not crediblycontinue indefinitely.
"Its effectiveness is probably diminishing over time. And itshould not be regarded as part of the normal public policyarsenal," he said.
