The Harvard professor, who recently delivered the
BBC's Reith lectures
on banking and the financial crisis said the Bank of England should be all powerful but the rules should not be completely clear.
"The discretion of the governor is the key source of discipline and I think that is a really important point if we re-run these events.
"If in 2006, the governor should have been in a position to call in the Barclays' bosses and tell them they had to play by the rules on the Libor Committee.
"If he had raised his eyebrows in the old way they might have done something about it. It is that combination of power and discretion which produces a good regulatory system - not 2000 pages of legislation.
"What you have to do is to empower the regulatory authority in such a way that it really can impose discipline on these players. It failed to do so. Why did these things happen? Because the Bank had essentially been rendered impotent by losing its supervisory power.
"Without that power it was extremely hard for anyone to bring discipline to the City of London. The reputation of the City is the issue here."
The discretion of the governor needed to be backed up by real power as it had been years ago when the Bank of England was able to revoke the licence of any other bank.
In one of his recent Reith lectures entitled
the Darwinian economy
, Professor Ferguson argued the financial crisis was not the result of de-regulation but rather a failure to enforce the regulations that existed.
"There will always be greedy people in and around banks. After all, they are where the money is - or is supposed to be.
"But greedy people will only commit fraud or negligence if they feel that their misdemeanour is unlikely to be noticed or severely punished. The failure to apply regulation - to apply the law - is one of the most troubling aspects of the past five years," he said.
HARDtalk is broadcast on the BBC News Channel on Mondays, Tuesdays, Wednesdays and Fridays at 0030 and 0430 BST and on the BBC World News Channel on Monday to Thursday at 0330, 0830, 1530 and 2030 GMT.
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