The FCA and PRA have been accused of having “a deep seated culture of box-ticking”.

A report also claims the cost of running the regulators has grown six times since 2000 to £1.2 billion a year.

The FCA needs to ensure it is “more transparent”, according to the highly critical publication called Cultural change in the FCA, PRA & Bank of England, which was released this morning.

It even claimed that: “Unless we change the culture of regulators we will be sleep walking into the next financial crisis”.

New FCA chief executive Andrew Bailey “must implement a comprehensive programme of cultural change in the FCA” after it had been previously “blown off course", Lord McFall wrote in the report.

The study, based on a year of work and interviews with over 60 people, described a “deep seated culture of box-ticking”.

It stated: “Through these cycles of reform the UK had created a regulatory system which is costly, complex, centralised and captured. The administrative costs of regulators are now over £1.2 billion 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. The FCA handbook costs £3,641, the same to buy as a second hand Mini Cooper.

“This complex box-ticking gives a veneer of safety and security. But it also creates regulation, which is both bureaucratic and ineffective. It can detract the attention of regulators away from wider systemic issues.

“It also feeds an industry of lawyers and compliance consultants while obscuring more important public concerns. It benefits big banks and damages competition from new entrants and new business models.”

The FCA “should make cultural change in firms its number one priority and ensure it has genuine internal competence to understand and regulate culture”, the report said.

It also needs to ensure that medium and smaller sized organisations have better access to knowledgeable supervisors, the report suggested.

The FCA should “build on recent successes such as project innovate and payday lending regulation in order to develop new ways of engaging with those who are regulated”.

The report said the regulator should ensure it “questions its policies through regular processes of external challenge by setting up an Independent Evaluation Office as exists within the Bank of England”.

Authors of the report called for the FCA to ensure it makes use of the new powers it has been given by Parliament to name and shame misleading adverts, get consumers redress and take action against senior executives.

The authors of the report painted a gloomy picture of the future, if its conclusions were ignored, saying: “There is a clear and present danger that we will repeat the mistakes of history.

“Our findings are clear: Unless we change the culture of regulators we will be sleep walking into the next financial crisis.

“This will have a devastating effect on our economy and our political system. Memories of the 2008 crisis are rapidly fading and industry lobbying has become more intense.”

In a statement, the FCA responded: “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.”