UK Financial Services Authority Chairman Adair Turner has admitted numerous regulatory shortcomings in the organisation and praised the “twin peaks” model to be introduced next year.

Lord Turner became chairman in September 2008, as the banking system began to collapse, and says he has since introduced radical change to address the failures that led to the crisis.

“In its supervision of banks the FSA made huge mistakes,” he said while speaking at a banquet in London. “It has acknowledged them and changed radically in response.”

He says the FSA was asked to do too much, “combining in one organisation functions best kept separate. Good prudential and good conduct supervision requires different skills and approaches.

“Combine them in one organisation and there is a danger – which became reality in the FSA – of divided top management attention and an insufficiently differentiated approach.

“The pre-crisis structure left a gaping underlap between the Bank of England being responsible for monetary policy and the FSA for the regulation of individual firms, with neither adequately focused on the systemic risks.”

Under the new system, prudential supervision will be the responsibility of the Prudential Regulatory Authority within the Bank of England, while the Financial Conduct Authority will supervise business and the Financial Policy Committee will identify risks across the UK financial sector.

Lord Turner says failures in banking supervision should be balanced against the “many other parts of our financial system… including the wholesale insurance market of Lloyd’s and related companies… which played no role in the origins of the financial crisis and which have continued to provide important, high-quality services to the world economy throughout the past five years”.