Martin Blessing told a London court on Monday Commerzbank had to renege on promises made under different circumstances.
It was the speed and the amount of change in the economic situation towards the end of the year (2008) that made us change our attitude to the bonus pool and that was why we made the decision to reduce the bonus pool.
It was the right thing to do, he said.
The situation changed due to the worsening of the economy after the 2008 collapse of Lehman Brothers, the German state's bailout of Commerzbank, and the waning performance of Dresdner, which the bank bought in 2009.
A group of 104 London-based bankers launched a legal battle against Commerzbank in late 2009 after some were paid 10 percent of the bonuses they were promised for 2008, claiming they had been guaranteed a bonus pool of at least 400 million euros to keep them at the bank during a time of upheaval.
The bankers, whose claims range from around 15,000 euros to 2.6 million, have said the lender's financial woes had little to do with its legal obligations.
Blessing, who gave up his own bonus in 2008, said the announcement of the bonus pool to employees at a town hall meeting in August 2008, was not legally binding.
It was necessary to differentiate between a promise made verbally and a written contractual agreement, he said.
If it was contractually binding, then of course it would need to be paid because then it is like a fixed salary.
The case hinges on whether Commerzbank was entitled to cut bonus awards for some staff by invoking a so-called MAC clause -- a material adverse change in economic conditions.
Andrew Hochhauser, a lawyer for the bankers, said last week that although the claimants remained loyal to the bank and the bonus promises first made by former Dresdner investment bank head Stefan Jentzsch in August 2008 were reiterated on numerous occasions, the bank had moved the goalposts.
Blessing denied this accusation, saying market circumstances changed and the bank then had to adjust accordingly, adding he had to take into account the expectations of shareholders and the general public's opinion as well as those of the bankers in coming to the decision to slash bonuses.
Blessing said he had always disliked the bonus pool, which he described as ill-advised and excessive in his witness statement, adding that this was a matter for Dresdner.
In his witness statement, Blessing said he had limited involvement in the matters that are the subject of present claims.
Hochhauser accused Blessing of material omissions in his witness statement, adding the chief executive presented a distorted and incomplete picture of his participation in and knowledge of events.
Blessing repeatedly said he could not recall specific details, adding it was a very intense time when he had hardly any weekends and had been working for up to 18 hours per day.
The row has returned to court at a time of public anger over the rich rewards bankers receive while ordinary household incomes are squeezed.
(Editing by Dan Lalor)