The chairman of the UK financial watchdog has warned that the economic recovery could be undermined if new regulation is introduced too quickly.
Lord Turner said reducing debt levels across the financial system was key, but doing so too quickly could slow the recovery.
He also warned regulators not to get preoccupied with bankers' bonuses, which were not the fundamental problem.
Financial reform is in the spotlight as bankers gather at a London conference.
Key policymakers and bankers have been outlining their views to British Bankers' Association (BBA) members at a time when the coalition government is considering regulatory measures designed to avoid future financial crises.
In preliminary comments ahead of a speech he will make on Wednesday, Lord Turner said: "Our regulatory response will not be effective unless, in the long run, it reduces leverage in the financial system, and constrains it in the real economy.
"The transition to that sounder system needs to be managed with care - too rapid a progress to higher capital and liquidity standards could slow recovery."
Policymakers are agreed that banks need to hold more cash to guard against loans going bad in the future - what they call higher capital ratios.
Leading bankers also called for caution when imposing new regulations.
Speaking to the BBA, Stephen Green, chairman of HSBC, said: "Governments and regulators need to calibrate carefully the impact of the various banking reform measures on our fragile western economies if we are to avoid choking recovery and plunging into a new credit crunch."
Lord Turner also warned regulators against placing too much importance on the bankers' bonuses that caused public outrage during the financial crisis.
He said that large bonuses paid out to bankers for selling "over-complex and risky products of little use to humanity were a major problem.
"[But] if we only address banker bonuses and not the fundamental drivers of credit supply instability, we will not adequately reduce the probability of a repeat performance."
These comments echo Lord Turner's remarks made last year, arguing that some aspects of the more speculative trading at investment banks were "socially useless".
However, such comments were dismissed by the new chairman of the Treasury Committee, Andrew Tyrie.
"In such a climate of debate, regulators need to be cautious of moralising about which activities are socially desirable," he said.
"I hope that such comments do not become the routine fare of regulators. As a general rule it is not the regulators' primary job to moralise."
Leading bankers also lined up to defend their industry.
Angela Knight, head of the BBA, described the reputation of bankers as akin to a "a leper colony to some, or carriers of bird flu to others".
But she said that bonuses in the UK were already regulated and were assessed against "proper performance figures".
Speaking to the BBA, the Royal Bank of Scotland boss Stephen Hester also warned of public misconceptions about banking.
"If we do not constructively challenge these myths, then we will be seen as drifting further away from the public interest, with potentially damaging consequences," he said.
As an example of these "myths", he mentioned the belief that "banks have little interest in supporting small businesses", whereas he said the truth was that it was the small businesses who had little interest in borrowing.
He also attacked the "casino label" for investment banking, claiming that this business financed the building of schools and hospitals, and helped people to buy homes.
New bank taxes
All Mr Hester's comments came after Financial Secretary Mark Hoban called on banks on Monday night to exercise restraint in paying bonuses.
Ahead of this year's bonus season, he said now was the time for banks to send out a message to the public that they "now operate in a way that is fair and stable and no longer rewards employees based on short-term performance whilst leaving investors and taxpayers exposed to the long-term risks."
He also confirmed the government planned to introduce two new taxes on banks.
The first will be a "bank levy" aimed at raising £2.5bn ($1.7bn), that was included in George Osborne's first budget and will apply to banks' risky borrowing.
Second, a "financial activities tax" will be charged on the profits earned by banks plus the bonuses they pay.
The two taxes were both originally proposed by the International Monetary Fund in April to be applied by governments across the globe.