A group of MPs has argued the Financial Services Authority (FSA) and the Bank of England (BoE) should be stricter in issuing warnings to financial institutions to avoid another credit crisis.

The Treasury select committee said in a report on the recent market turbulence it was concerned by the lack of understanding of the risks involved in some of the complicated financial products held by investors that triggered the global loss in confidence and subsequent credit crisis.

In the report, the committee said: “We recommend, in future, when issuing warnings of potential problems, the BoE and FSA should clearly highlight the two or three most important risks in a short covering letter to financial institutions, for discussion at board level.

“The Bank and FSA should seek confirmation these warnings have been properly considered, and publish commentaries on the responses received.”

Both the Bank and the FSA warned of deteriorating market conditions in 1997, the report said. But “it is has been reported to us these warnings were not taken on board by some banks and building societies,” the MPs added.

Credit agencies were also criticised in the report for not being transparent enough and potentially having conflicts of interest between giving ratings and advising investors.

The report said unless agencies became transparent and disclosed conflicts of interest, new regulations may need to be introduced.