Julian Knight: The regulator must show whose side it's on

So a full-blown crisis across the UK banking sector has been averted, just. But as the dust settles on the wreck of the Rock, the inevitable recriminations have begun. Mervyn King, Governor of the Bank of England, is under pressure and the board of Northern Rock look destined for the high jump. There will be little sympathy from savers, shareholders or bank employees, a good many of whom will probably lose their jobs through no fault of their own.

The Rock crisis shows starkly that consumers trust their banks about as far as they can throw them. It is now up to the Financial Services Authority (FSA) – which has caught its fair share of flak over its handling of the affair – to act on the lessons. If the FSA isn't up to the challenge, we are more likely to see the deeply damaging sight of queues of customers outside another high-street bank, sooner rather than later.

First on the to-do list of FSA chairman Sir Callum McCarthy should be reform of the Financial Services Compensation Scheme. The Treasury's guarantee to protect savers' cash only applies to Northern Rock. Everyone else still has to rely on the inadequate FSCS, which offers no automatic refund on deposits over £35,000. With incomes and house prices higher than ever, this cut-off is frankly a bit of a joke.

Second, the FSA should make it crystal clear to banks that adopting a Rock- style business model – closing branches, treating savers as second-class and relying on the single crutch of money markets for funds – is no longer on. When Chancellor Alistair Darling said, before the Rock crisis, that we needed a return to old-fashioned banking, he was speaking sense.

Third, bank websites have to be brought up to speed. As the Rock crisis kicked off, its site went down almost as quickly as its share price. Online savers were left frantic and this added to the air of panic. It is possible to have substantial extra server capacity on call – it just costs money. The FSA could take a lead and insist banks fireproof their sites against a sudden surge in traffic.

Finally, the City regulator could look at its own "constitution". It has the twin jobs of protecting the interests of the City as well as consumers, and consumer group Which? reckons the FSA can't serve two masters at once – that the public need to be given the message loud and clear that the regulator is on their side all the time. What's more, it hardly speaks like a bona fide consumer champion. Its public utterances are a master class in financial jargon and double-speak.

No wonder, large swathes of the public don't know what the FSA is or what it does. With the challenges ahead of it, the watchdog needs to up its game.