In a landmark report aimed at identifying ways of preventing a repeat of the global banking crisis, the Financial Services Authority (FSA) also called on Wednesday for a new European banking regulator, and urged G20 leaders to deliver on promises to create an early-warning system for the global economy.

The report, commissioned by Prime Minister Gordon Brown at the height of the banking meltdown last October, suggested banks hold a minimum core tier one capital ratio of 7 per cent during the peak of the economic cycle.

The ratio, a key measure of financial strength, is currently set at 4 per cent under British and international guidelines.

That would make banks less profitable, but would equip them to weather storms such as the credit crunch, which has in the past 18 months caused the collapse of Wall Street giants Lehman Brothers and Bear Stearns, and triggered the full or partial nationalisation of five major British lenders.

'There is a strong prima facie case that minimum bank capital requirements should in future be significantly above those which have applied in the past,' FSA chairman Adair Turner said in the report.

'The future world of banking probably will and should be one of lower average return on equity but significantly lower risk to shareholders as well as to depositors.' -- REUTERS