The Financial Services Authority in Britain is critical of its own role in the events surrounding the collapse of the Royal Bank of Scotland nearly three years ago.
The FSA also pointed the finger at RBS management and said bank takeovers should face deeper scrutiny and bank directors should be more accountable for their actions.
The agency said Royal Bank of Scotland nearly collapsed in 2008 because of poor management decisions, inadequate regulation and a flawed supervisory system.
It said RBS had too weak a capital position to proceed with the takeover of parts of the Dutch bank ABN Amro.
The BBC reports the £49 billion purchase took place at the height of the financial crisis in 2007.
The episode cost British taxpayers £45.5 billion and helped push Britain into a recession.
SRN banking analyst Ralph Silva says laws may need to change to make bank bosses more accountable for their actions.
RBS is now 83%-owned by the government. It has cut 27,500 jobs since the beginning of the financial crisis.
Last month RBS reported pre-tax profits of £2 billion in the three months to 30 September, compared with a £1.6 billion loss in the same period last year.
It warned of further job losses and said the global economic slowdown was delaying its recovery.
