It criticised a deep seated culture of box-ticking within city watchdogs and said much-needed rule changes, implemented since the 2008 economic crash, are being watered down.

The report by Cass Business School for think-tank New City Agenda criticised the Financial Conduct Authority (FCA) in particular for scrapping its review of bank culture following the 2008 crisis and “failing to make effective use of its power”.

It calls for new FCA chief executive Andrew Bailey, who took charge in July, to remain independent from politicians and prioritise cultural change. It said the FCA should make use of new powers to name and shame misleading adverts, secure compensation for consumers and take action against senior executives.

“Memories of the 2008 crisis are rapidly fading and industry lobbying has become more intense. There is a clear and present danger that we will repeat the mistakes of history. The attention of politicians has moved on,” the report said.

Researchers said the administrative costs of regulators are now over £1.2bn a year, six times what they were in 2000.

“There are over 13,000 pages of rules, guidance and supervisory statements published by the FCA and PRA [Prudential Regulation Authority] …This creates regulation which is both bureaucratic and ineffective,” the report said.

The report’s author, Andre Spicer, said: “Britain’s financial regulators must change to avoid sleepwalking into another financial crisis that will have a devastating effect on our economy and political system.

“If we want to avoid this, just making minor tweaks to the ever expanding rule book is not enough.

“We need to ensure a meaningful change of culture at our major financial regulators – they must practise what they preach. There is evidence of positive change but more needs to be done – or there is a big risk these important transformations will be derailed.”

An FCA spokesperson said: “Later this week we will be publishing our Mission which is designed to provide a guiding set of principles around the strategic choices the FCA makes. As part of the Mission we will be seeking engagement with all our stakeholders so that we can set out a clear path ahead for financial conduct regulation in the UK.”