THE head of the City’s financial watchdog warned yesterday that banks were already in danger of forgetting the lessons of the financial crisis.

Lord Turner, chairman of the Financial Services Authority (FSA) told MPs on the Treasury Select Committee he was worried about a lack of will to drive through reform as memories of the turmoil fade.

The chairman – speaking a day after news of a £9.6m pay and shares package for the chief executive of part-nationalised Royal Bank of Scotland emerged – added there was “very aggressive hiring going on” in the trading activities of investment banks.

He said: “I think it is actually incredibly important for us to realise the enormous intensity of the crisis that we have just been through.

“I think there is a worry that because we are now seeing some positive signs, and because of the exhaustion level of driving through the changes we require, that there could be some drawing back from the degree of radicalism we require.”

He also called for an effective “tax on size” to prevent banks from growing too big.

Lord Turner said higher capital requirements for larger banks would reduce the risks of failure.

‘‘I think it is (an idea) that we need to think about and think about at a global level,’’ Lord Turner said.