During an interview on the BBC’s Andrew Marr Show, Turner said the FSA did not focus enough on the risks being taken by banks.
He said: “With hindsight, the FSA, like other authorities throughout the world, was focused too much on individual institutions and the pressures and procedures within them, and not adequately focused on the totality of the systemic risks across the whole system and whether there were entire business models, entire ways of operating, that were risky.”
Turner said the FSA will make major changes to how it regulates banks’ capital requirements, liquidity and remuneration policies, as well as the operation of credit ratings agencies.
He said: “The new world of regulation will look really quite different.”
Despite the admission Turner insisted that the FSA’s staff should be paid bonuses of up to 15 per cent of salary.
He said without the bonuses, staff would effectively be taking a pay cut due to the “variable pay” system at the regulator.
He said: “That’s against the background where we’re being told by Vince [Cable] or David Cameron or others that we need better people. That’s not the way to go.”
However Turner confirmed that FSA chief executive Hector Sants has chosen not to receive a bonus this year. In 2007/08 Sants was paid £662,000, including a£114,000 bonus.