Gordon Brown has warned that governments risk "sleepwalking" into another financial crisis if the G20 fails to create an early warning system and clamp down on the shadow banking sector.
In a speech prepared for the Bank of England’s independence conference in London today, the former British prime minister said another crash could be inevitable without critical reforms and better regulation.
"My belief is that governments will go sleepwalking into the next crisis unless we deliver a more effective G20, a full early warning system and better regulation of the shadow banking system," he said.
Mr Brown, who also served as chancellor under the Tony Blair administration, singled out the risks of the so-called shadow banking system, referring to financial services firms or banking activities that fall outside of standard regulation.
"If, for example, the next financial crisis comes out of Asia - and if, as likely, because of problems that arise from a shadow banking system in commercial and industrial lending, we will ask ourselves next time: Why did we not act after 2008 to create a better global early warning system and make our financial regime more fully co-ordinated globally?" he said.
Mr Brown - who gave the Bank of England its independence in 1997 - said the banking sector could not shoulder the burden of reform on its own.
"These decisions to act cannot be left to bankers alone. Britain and the world urgently needs to get the balance right between the need for expertise, the need for proper accountability and the need for effective leadership.
"There will be no hiding place for the G20 or any government the next time."
He warned that without political leadership, the momentum for global financial supervision will wane, while protectionism will continue to rise.
"Financial elites will be seen as out of touch and distant, and even those trying to prevent the next financial crisis - ironically those doing most to cement the kind of co-operation we need - will fall victim to anti-globalisation protests."