Speaking at the CBI Scotland annual dinner, António Horta-Osório said banks had let the public down by becoming “complacent, non-customer focused and inefficient”, The Telegraph reports.

He added: “The banking industry has done itself no favours. Issue by issue and scandal by scandal, the faith and trust in our industry has been eroded.

“The industry must change. We must recast the banking model … retail and commercial banks should be simple and they should be boring.”

Commenting on the FSA’s recent consultation paper on clamping down on incentives, he said banks had “focused too much on sales targets”, insisting that pay will increasingly become linked to the long-term performance of the bank in the future.

Meanwhile, Horta-Osório also urged the new regulator, the Financial Conduct Authority, to have “the courage to take pre-emptive action so we avoid costly and retrospective actions as we saw with PPI”.

His speech came just a day after it was revealed that Lloyds itself is being investigated by the Financial Services Authority over commission payments on its retail product sales.