Sir Mervyn King said on Sunday that the failings of the financial and regulatory system were the root cause of the turmoil which struck the world economy almost six years ago.
King, who leaves the Bank this summer, told Sky News's Murnaghan programme that there was widespread risk-taking in the runup to the credit crunch, and it had been a mistake to give the banking sector such a lofty status in the good times.
"Where the banks contributed to the problem was that they themselves had taken too many risks on their balance sheet and they simply didn't have enough capital to absorb the losses that were likely to come along and people took fright, they lost confidence in the banks, they didn't provide money to the banks so the banks couldn't lend to businesses or households.
"I would say to people though, don't demonise individuals here. This wasn't a problem of individuals, this was a problem of failure of a system. We collectively allowed the banking system to become too big, we gave them far too much status and standing in society, and we didn't regulate it adequately by ensuring it had enough capital."
Asked if he regretted not doing more to prevent the crisis, King said he and the Bank had issued warnings.
Conservative MP Brooks Newmark said King could not escape some responsibility for the errors that helped to cause the biggest financial crisis in generations.
"He is the Governor of the Bank of England, it sort of says it on the tin what he is responsible for," Newmark told Murnaghan.
Lord Myners, the former City minister, agreed that King had failed to see the problems building-up in the runup to 2007, and had become "hung up on moral hazard" once the banking sector was being bailed out.
"The judgement of history which with Governors is written about a hundred years later, will say that he failed in two very major respects and also a third one, that he failed to modernise the Bank," Myners added.
King also expressed concern over Britain's new Help to Buy scheme, which involves the government guaranteeing up to 15% of a mortgage on properties worth up to £600,000.
The scheme, which begins in January 2014, is due to run for three years. King warned that there is "no place" for a permanent scheme of this kind.
"This scheme is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market.
"We do not want what the United States have, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position.
"So, we mustn't let this scheme turn into a permanent scheme. Now when is the right time to terminate it will depend on economic conditions at the time."
King also warned that the struggling eurozone economy remains the largest threat to the UK, and criticised European leaders for driving their economies into a "downward spiral".
Britain's "modest recovery" could be derailed, he warned, if the single currency region remains trapped in recession or only achieves low growth.
"It is very difficult to see that they will be growing quickly for a long while, and that downward drag on exports from the UK to Europe, they account for almost half of our exports, and the fact that our banks still have some exposure to the euro here is undoubtedly the single biggest factor dragging down on our economy."
The eurozone economy has now been shrinking for the past 18 months, with sharp recessions in countries such as Spain, Italy and Greece where tough spending cuts and tax rises have been imposed.
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