Gordon Brown has admitted he made a big mistake while setting up the FSA because he did not appreciate the entangled relationships of financial services institutions.
In a keynote speech to the Institute for New Economic Thinking at the Bretton Woods conference in New Hampshire on Saturday, Brown said the FSA was set up on the assumption problems would come from individual institutions.
He said: “We set up the FSA believing the problem would come from an individual institution. That was a big mistake. We did not understand just how entangled things were.
“We did not understand how risk was spread across the system, we did not understand the entanglements of different institutions and we did not understand, even though we talked about it, just how global things were.
“So we created a monitoring system which looked at individual institutions. That was the big mistake.”
Brown told the conference that he accepted his part of the responsibility adding that the crash had led people to completely reconsider how financial services are regulated and that he was not the only one who had made mistakes.”
He said: “I have got to accept my responsibility and I do, and I have been very open about saying we made mistakes on that. But in a world where the understanding of what global meant was incomplete, I think many writers as well as many regulators made exactly the same mistake.”
Brown said he had come under “relentless pressure” from banks not to over-regulate. Last April he said in a television interview that “we should have been regulating them more”.