The financial system is fragile again and regulators are not clever enough to see the full picture, with U.S. moves to starve watchdogs also not helping, Financial Services Authority (FSA) Chairman Adair Turner said on Thursday.
One sometimes feels that this financial system is like some incredibly complicated waterbed, when you try and deal with something here and then something happens at the other end, Turner said in an interview with Prospect magazine.
We're just not clever enough to see it, Turner said.
He is worried the U.S. financial industry is persuading lawmakers to row back a sweeping reform of Wall Street known as the Dodd-Frank Act.
What is going on in Congress is deliberate action to starve some U.S. regulators of funds, which I think has a degree of motivation coming out of some financial interests through campaign money to members of Congress, Turner said.
Turner, a senior member of the Group of 20 (G20) leading economies' Financial Stability Board, appeared to back further money printing or quantitative easing by the Bank of England to stimulate a UK economy some analysts see going into a recession.
He expects global finance to shrink once all the tougher new bank capital and other rules have been applied.
The FSA is being scrapped next year and will be replaced by two new regulators, one inside the Bank of England, the other a standalone consumer watchdog with no role for Turner so far.
He has been touted as possible governor of the Bank of England but would not be drawn on his next job.
I think first of all, I'll just have a very, very long sleep. And then beyond that, I'll do something else, he told Prospect.
(Reporting by Huw Jones; Editing by David Holmes)