City faces a double crisis over trust and reputation, FSA's Lord Turner warns

Financial Services Authority boss Adair Turner, a leading contender to be the next Bank of England Governor, yesterday warned the City faces a new "crisis of trust and reputation" and slammed previous regulation as "clearly inadequate".

Lord Turner told the FSA's annual meeting that "the Libor scandal has caused a huge blow to the reputation of the banking industry" and regulators "must in future find ways to intervene earlier on".

He admitted the FSA had suffered its own "pre-crisis failings", before he joined in 2008, just as Lehman Brothers, Royal Bank of Scotland and HBOS failed.

"2008 was a prudential crisis – banks failed," said Lord Turner. "Significant parts of the UK financial services industry, including but not exclusively our major banks, face another crisis as well: a crisis of trust and reputation, produced by the series of mis-selling scandals – pensions, mortgage endowments, split capital trusts, payment protection insurance — which have eroded customer confidence that the industry is looking after its own customers' interests rather than its own interests."

In what looked like a pitch for the Bank of England job, Lord Turner said regulators "need to think carefully how far we should shift our past approach to the supervision of wholesale conduct".

His comments came as Bank deputy governor Paul Tucker, a rival for the Governor's job, faces questions over the Barclays Libor scandal.