Mr Quinn was heavily involved in the supervision of Johnson Matthey merchant bank, which collapsed in the 1980s, as well as BCCI and Barings.
Speaking on the BBC's Money Programme last night, Mr Quinn said: "I certainly could not (rule it out) ... I would be misleading you if I thought a guarantee was something that could be offered by the supervisor's authorities.
"It's an absolutely fundamental part of an open, free-market economy that people are free to make choices as to where they put their money or who they place it with, and the possibility that that might lead to the risk of loss ... indeed, the existence of deposit insurance arrangements in the UK and most other countries is, in fact, an explicit recognition that banks will go bust, and there is something there ... to safeguard people against the loss of all their savings or all their investments."
Mr Quinn was asked if he thought the level of risk, to depositors and investors, was acceptable. He said: "It's not for me to judge actually, I mean that is, in a sense, fundamentally, a political question.
"It's a question as to whether you want a financial system that has all the risk taken out of it, or more of the risk taken out, so that people have greater assurance. The price they pay for that is that they have less choice. They have got fewer products on the balance sheet, they've got less deposit products, less asset products. I mean that's the price you pay for that."
Many critics of the Bank of England, including the Labour Party, have suggested recently that the regulatory function should be removed from the Bank and that it should be left to handle the battle against inflation. Supervision of banks would then be handed to a new authority, a banking authority.
Mr Quinn commented: "All I would say is that moving around the institutional structures doesn't by itself answer the questions."
He said that as to whether there is a conflict involved - one of the common charges is that the Bank of England has got a conflict between its monetary role and its supervisory role - that question would need to be answered, whether in the Bank of England or any other institutions.
Mr Quinn said: "When you talk about the stability of the system, then, of course, it's hard to look anywhere in the world and not find a central bank involved in carrying out that role."
Pressed on the relationship between the Bank of Engalnd and the banks under its supervision, which has prompted accusations of complacency, Mr Quinn said: "I've tried to argue that in fact the incidence of failure in the UK hasn't been any greater, and, I would argue, has been lesser than in most other places ... there is a risk of what's called regulatory capture, which is when the supervisors get too close to the institutions that they're regulating."Reuse content