It's just as well Angela Knight laughs a lot. As chief executive of the British Bankers' Association, she needs a sense of humour. Her job is to defend the nation's bankers and, even in the good times when she started in early 2007, that was not easy.

As the credit crunch has turned to recession, the ire directed at the banks has reached fever pitch. Bankers have become the bogeymen - in some cases, deservedly. And, with banking chiefs reluctant to take to the airwaves, some of that anger has been focused on Knight as she fields questions in endless TV studios.

She has complained about feeling as if she is the only person defending banks. "I end up talking more than many," she says diplomatically, when asked about her members keeping out of the spotlight. But now she faces accusations of arrogance and high-handedness for suggesting politicians and the public don't understand the banks' plight over mortgage lending and loans to small businesses.

Knight - a former Tory MP with a cheery open manner and no-nonsense style - admits the flak has started to get to her. She's just been over to Brussels, hosting a dinner for European Central Bank chief Jean-Claude Trichet. It's early in the morning, she is feeling a little tired, and now she is not laughing.

"It's the personalisation of it, I do confess, that is uncomfortable," says Knight. "I run the trade body. You are asked to explain the situation and then you get accused. Often the explanation is not liked, even when it's right - like the very fact that the global financial system is frozen does impact lending, the fact that a bank is a commercial enterprise employing tens of thousands of people. Then it's a case of, 'Oh, well, I'll blame her.'"

As a former Treasury minister under Ken Clarke, Knight is used to the public glare. Brought up in Sheffield, she cut her teeth as a Tory councillor, opposing David Blunkett on the council. At the same time she ran a small engineering firm - she had a chemistry degree, like Margaret Thatcher, which invited comparisons. Then, shortly after being elected MP for Erewash in 1992, she suffered an acrimonious marriage break-up - made more difficult later by her husband turning to PR man Max Clifford.

After losing her seat in the 1997 election, she soon became a City fixture, serving as a vocal chief of stockbroking trade body the Association of Private Client Investment Managers and Stockbrokers for a decade. Arguably, she has made more impact at the BBA than she ever did as a junior minister.

Knight knows that winning sympathy for bankers is a hard sell. They borrowed and lent too freely. Now the gap between lending and saving needs to narrow, but that can't be done quickly. So the banks are caught between a rock and a hard place: the Government expects them to continue lending as well as trying to rebuild their balance sheets with improved margins.

Surely the heads of some of these failed banks didn't do her industry any favours by failing to say sorry or fall on their swords? "Yes, action should have been taken more quickly. But the heads of the banks that got into difficulties have all gone now. The court of public opinion says the industry is guilty of everything, though there is little separation between the different banks."

She feels there is a difference between those banks that collapsed into the arms of the state, RBS and HBOS, and those that needed little help, such as HSBC and Abbey owner Santander - and, to a lesser extent, Lloyds TSB (where she served as a non-executive director from 2003 to 2006) and Barclays. It is easy to be misunderstood, however, when Gordon Brown and Alastair Darling insist loudly that all banks pass on every rate cut in full and make thinly veiled threats about nationalisation.

"We've heard the threat," says Knight carefully. "We have huge international banks based in the UK, which is recognised around the world as a global financial centre. We should build on what we've got." Translation: back off.

Yet Knight knows the banks must respond after the huge injection of taxpayers' cash: "The Government wants to see benefits flow. The industry well understands that." Already some people, like those with tracker mortgages, are seeing big savings. But she feels the lack of mortgage finance and lending to small businesses has a lot less to do with banks themselves than with the changed landscape. There has been "a massive contraction" in institutions willing to lend.

Knight has been scathing in the past about the slow response of the Bank of England, the Financial Services Authority and the Treasury over Northern Rock, but is more circumspect now. The recent Bank of England interest rate cuts speak for themselves. "It's hardly fair for me to say constant criticism is difficult and then start on others. We continue to face an unprecedented situation." Much depends on America sorting itself out, she adds.

But what more could do the Bank of England and the Treasury do? Knight praises the special liquidity scheme and the opening up of the discount window. But she wants better guarantees for wholesale lending and "more inventiveness and thinking" to increase confidence. Despite all the cash being pumped in, Knight warns: "We have not resolved the issues in the wholesale markets. There is still a lot of fear."

Knight has a team of 60 at the BBA, and speaking out publicly is only part of her role. The BBA is involved in technical aspects of banking regulation and also oversees the setting of Libor, the interbank lending rate. Though this soared out of control, there are no plans to change the way it is set for now.

At the Treasury in the 1990s, she paved the way for the demutualisation of Halifax, Alliance & Leicester and B&B - all of which have been taken over in the recent turmoil. Any regrets? "When a barrier is removed, it doesn't mean it is absolutely right to rush through the gap. But it's not so much whether you are mutual, it's your business model. Yes, Northern Rock and B&B got into trouble. But Alliance &Leicester was a perfectly reasonable bank who accepted an offer from Santander." Mutuals have had their own problems, she notes.

And what about the future? She can already see the headlines when banks unveil their bonuses - though "we're not going to have a bonus season like before". And even on the train in from Berkshire, where she lives with her two sons, both in their early twenties, there is no escape from comment by fellow-commuters who may have seen her on TV the night before. Not everyone is complimentary.

She bats away any suggestion she might be tempted back to Westminster. "I stand aside on all political questions." But the banks are fortunate to have a frontwoman who speaks "fluent human" and, with her trademark string-of-pearls necklace, is a reassuring media presence.

"They are £25 pearls," she hastens to add, laughing again now. "And John Lewis is my jeweller."