The FSA's chairman, Lord Turner, has warned bankers radical changes in regulation are essential in order to avoid future crises.
In a speech at the annual British Bankers' Association conference, Turner said excellent supervision is a necessary but not sufficient condition for financial stability.
He said it was important to learn the lessons and accept the need for radical change, such as change in the style of supervision, change in the regulations applied to banks, and changes in the banks themselves.
He argued that strong capital and liquidity are central to the reform of banking regulation going forward.
"One clear need is to get better at identifying emerging systemic risks - and to create tools which can act against these risks at the macro level.
"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.
"The new, more intensive approach to supervision and the new regulations which we can and will impose can guard, to a significant extent, against the dangers of financial instability.
"But it is up to the banking industry itself to restore an appreciation of the positive role which banking can and must play and to create a culture focused on delivering necessary services to customers."
However, Angela Knight, chief executive, British Bankers' Association, says there is a danger multiple measures to control banks could result in less money being available to lend to businesses and individuals.
"There is a danger that an over layering of multiple capital measures could result in undue constraint on the ability of banks to support households and firms lending.
"I believe insufficient attention has been paid to understanding the impact of changes to law, regulation and new capital requirements or the way they interrelate. This analysis needs to be done now so there change can be properly prioritized, planned and phased in.
"We all want greater financial stability and the banking industry is keen to change. But there must be a balance in the application of new standards and an understanding of the impact they will have on the wider economy and individual customers. Lastly, and very importantly, the UK needs to take a co-ordinated international approach to change that recognises banking operates in a global market."
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