Banks should use the row over the sail of complex financial instruments to small businesses to overhaul their customer relationships and link pay to customer service, according to Hector Sants.
In his last interview as chief executive of the Financial Services Authority (FSA), he told the Guardian there was a "commercial opportunity" for financial firms to improve customer treatment.
The FSA is currently investigating complaints about the sale of interest rate swaps to small firms before rates were cut to historic lows three years ago, the report said.
A report is expected before the end of the month.
The Guardian said Sants refused to elaborate but urged banks to avoid any re-run of the £9bn payment protection insurance (PPI) mis-selling scandal.
"It's clearly an opportunity for banks to respond positively, pro-actively and with the right attitude and get on and do something about it," said Sants. "There is an opportunity to demonstrate a new approach".
£300bn of liabilities
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Appointed by FCA and PSR boards