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He said it seemed a “perfectly reasonable observation” that very senior people at the top of banks should be held to account for the risks they take but stopped short of committing to a new criminal offence of reckless misconduct in charge of a bank.

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“They’ve asked us to consider whether it’s possible to implement this further offence for very senior people. We’ll do that, we’ll respond to parliament and then if necessary we’ll legislate,” he said.

But Lord Myners, former Labour city minister, warned that “very little” would change for “several years” after the report. He said George Osborne, chancellor, would respond with “fine words” in his Mansion House speech on Wednesday night but there would be many further reviews, for example, on competition, pricing, and account portability.

The review — which also rebuked the government for interfering in state-backed banks — was cautiously welcomed by the City of London.

Boris Johnson, mayor of London, welcomed the report’s focus on good governance and said wrongdoing should be “rooted out and punished”. But he also said the City needed to remain competitive and that the UK should help bring other global financial centres towards better, but not heavy-handed, regulation.

Mark Boleat, policy chairman at the City of London Corporation, the Square Mile’s local authority, said the report contained some “sensible suggestions” on incentives, accountability and increased competition that would foster long-term thinking and improve risk management.

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He added: “It is important, however, to note that much work has already been done in this area and the impact of past reforms should be properly assessed before more changes are introduced. What the banking sector needs is clarity and certainty from policy makers over the future shape it will be required to take in coming years.”

Anthony Browne, chief executive of the British Bankers’ Association, called it the “most significant report into banking for a generation”. He said banks looked forward to working with the government to reform the sector.

Andrew Tyrie, chairman of the parliamentary committee that wrote Wednesday’s report, defended the decision to include the threat of prison for bankers in cases of “very serious misconduct”.

He insisted it would only be used if the government was forced to bail out a bank.

Mr Tyrie said a new criminal offence of reckless misconduct in charge of a bank was needed because bankers could harm the whole economy.

“Bankers are different. Bankers and banks are in a position where they cannot just do harm to their shareholders but do harm to the whole economy and end up putting taxpayers on the hook,” Mr Tyrie told the BBC’s Today programme.

“Remember this can only be triggered — the reckless misconduct investigation — when there has been taxpayer support for a bank.”

He said the financial crisis was like Murder on the Orient Express where “everyone had some small contribution on the deaths and nobody was responsible”.

Mr Tyrie said it was “absolute nonsense” that bankers could be driven out of the UK by the report’s suggestions. He added he was not criticising paying the successful well but was proposing measures such as long deferral of bonuses to ensure the money was truly deserved.

Additional reporting by James Pickford.

© The Financial Times Limited 2013

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UK: Reckless bankers may be jailed