The new system of financial regulation must help consumers by promoting competition and better communication so it does not repeat the "shortcomings" of the Financial Services Authority (FSA), a committee of MPs has said.
The Treasury Committee said the FSA was "dominated by a box-ticking culture" and had been unsuccessful in protecting people from "spectacular" regulatory failures such as the mis-selling of payment protection insurance (PPI).
It said the Government must put competition "at the heart of the new regulatory framework", ahead of the drafting and publication of the Financial Services Bill this year.
Treasury Committee chairman Andrew Tyrie said: "The plain fact is that the FSA did not succeed in protecting consumers from spectacular regulatory failures.
"The mis-selling of PPI and endowment mortgages are just two examples.
"The FSA is not only expensive, for which the consumer always pays, but many have told us that it has also become bureaucratic and dominated by a box-ticking culture. The creation of the Financial Conduct Authority (FCA) is an opportunity to create something much better."
The report focused on the FCA, a business regulator which is to form part of the new system.
It said the FCA must have more reliable estimates of its own cost-effectiveness and be more accountable to Parliament, as well as communicating better with the financial services industry.
Mr Tyrie said: "Too often we've heard that the FSA is aloof and unapproachable and that, in any case, firms are nervous about approaching them - we must break with that culture.
"Encouraging a greater level of engagement between firms and the regulator is in the consumer interest."
© 2012 Press Association