Bank of England governor Sir Mervyn King has admitted more should have been done to avert the banking crisis and has urged the Government not to delay reforming the financial sector.
He concedes the Bank of England should have "shouted from the rooftops" that banks had been allowed to borrow and lend too much, and says the present crisis is "far from over".
He points to the eurozone debt crisis and the fact the UK economy is still not back to health and inflation is still too high. Last week, it was revealed that the UK had slipped into a double dip recession.
Sir Mervyn (pictured, right) also says more should have been done to convince the Government to recapitalise banks sooner and says a decision to take away the power of regulation from the Bank in 1997 returned "to haunt us".
He sympathises with people who feel angry about the banking crisis, which sparked a deep recession that caused one million job losses.
He adds: "To many of you, this will seem deeply unfair, and it is. I can understand why so many people are angry."
The root of the last crisis was that banks over-extended their activities in the run-up to the financial crisis, with their balance sheets increasing from around a half of national income to more than five times in a generation.
A new Financial Policy Committee (FPC), as part of the Bank, will take control of regulating the City next year, but Sir Mervyn says further reform is "essential".
He urges the Government to bring in the Independent Commission on Banking's recommendations to force banks to separate their retail and casino-style investment banking arms "sooner rather than later".
The Bank is "up to the task" of resuming responsibility for regulating the City next year, and would step in to prevent lenders over-extending themselves again.
There had been a "failure of imagination" to appreciate that some of the biggest banks, such as Royal Bank of Scotland and Lloyds, could need a bail-out, partly because there had been no boom or period of high inflation to suggest a crash, he claims.
But Sir Mervyn says we owe it to our grandchildren to reform the system further.
He says: "We don't build nuclear power stations in densely-populated areas, nor should we allow essential banking services and risky investment banking activities to be carried out in the same 'too important to fail' bank."
He adds that dealing with the consequences of our "bad banking situation" is likely to be "a long, slow process" and "the crisis has cast a long shadow".