Sir Mervyn said that more money from banks' shareholders' should be "on the line", to make banks more careful in choosing to whom they lend.

He added that recommendations made by Sir John Vickers, including ring-fencing retail bank operations, should be enacted "sooner rather than later".

He also admitted the BoE should have done more to avert the banking crisis.

"With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called 'light-touch' regulation hadn't prevented any of this," he said as he gave the annual Today Programme Lecture in London.

However, David Blanchflower, a former member of the BoE's Monetary Policy Committee, accused Sir Mervyn of being "disingenuous".

"If Mervyn King had thought more regulation was important he could've done something about it. And because he didn't he must take responsibility for the fact the Bank of England missed the biggest financial crisis in a century," he told BBC Radio 5 live.

Three Rs

Sir Mervyn said that three reforms topped his list: regulation, resolution and restructure.

From next year, the BoE's new Financial Policy Committee will have the power to regulate banks.

"When, as it will, the economy returns to normal, our role will be to take away the punchbowl just as the next party is getting going," Sir Mervyn said.

The biggest risk to banks at present, he said, was from the troubles in the eurozone, which were "far from over".

"That's why we've been pushing for banks to pay out less to their shareholders and employees and instead retain profits as a cushion against possible losses.