Increasing supervision will fail to stop future banking crises, warned FSA chairman Lord Adair Turner.

He said that supervision was necessary but would not keep financial stability in check. Rules applied to banks would need to be radically altered, reported the FT.

'One clear need is to get better at identifying emerging systemic risks and to create tools that can act against these risks at the macro level,' he said at the annual British Bankers' Association conference.

'But it is essential to recognise, however much we improve our ability to see bumps in the road ahead, that ability will remain highly imperfect.

'So the more fundamental change is to create a financial system with more shock absorbers, and the shock absorbers of the banking system are capital and liquidity.'

Dealing with the design of rules for banks that are too big to fail, cross-border banks and the legal separation of narrow banks and investment banking were the key issues for the industry to deal with.

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