However, he rejected any blame for the ongoing crisis that has led to a double-dip recession, saying it was a failure of the system rather than an individual.
The BBC spoke to him after the annual Today Programme speech, which he delivered yesterday. In it he said, "With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called 'light-touch' regulation hadn't prevented any of this."
Former member of the BoE's Monetary Policy Committee, David Blanchflower, accused King of being “disingenuous” however.
He said, "If Mervyn King had thought more regulation was important he could've done something about it. And because he didn't, he must take responsibility for the fact the Bank of England missed the biggest financial crisis in a century."
Mr King said there are three reforms that he thinks are needed in the banking sector: regulation, resolution and restructure. Next year, the BoE will have new powers to implement these reforms with their new Financial Policy Committee.
The debate over the blame for the financial crisis comes the same day as the CBI business group said that the UK economy would return to growth in the second half of 2012, with faster growth expected next year.
They did, however, cut their prediction on growth from 0.9% to 0.6%.
CBI said in their report that, despite a rather depressing economic winter, “business surveys suggest that underlying conditions are starting to improve, and that we should see more momentum in the second half of the year."