The head of the Financial Services Authority warned on Wednesday that the age of cheap credit may be over.
In an interview on BBC radio, Hector Sants, chief executive of the regulatory body, said he did not think financial markets would return to where they were before the global credit crunch which caused turmoil across world markets in recent months.
"I don't think markets are ever going to return to the way they were," Sants said. "The idea that at some point they will go back to normal, I think, is a misnomer.
"The new normal will be different from the way that markets behaved in the past."
Sants said he believed banks would revert to more old-fashioned and straightforward ways of lending, and would retreat from more complicated products which allow them to package and sell on cheap loans. This, he said, could mean the costs of borrowing for consumers was likely to rise.
"Banks themselves need to give consideration to how their business models will need to adapt to the changed market circumstances they have seen," he said.
