The outgoing governor of the Bank of England said there was a failure to adequately regulate the financial sector and society had given "too much status" to those in the City.
Sir Mervyn also warned that George Osborne's plan to boost the housing market must not become a permanent scheme because it was "too close for comfort" to a general state guarantee for mortgages.
Bankers who presided over the collapse of their institutions have been the subject of angry attacks from politicians, the public and the press, with RBS chief Fred Goodwin stripped of his knighthood and last month former HBOS chief executive Sir James Crosby offering to renounce his own honour, along with a third of his pension.
But in an interview with the Murnaghan programme on Sky News, Sir Mervyn said bankers were only part of the problem which led to the meltdown in the financial services sector.
He said: "What bankers did was not the only explanation of the crisis that we had. What we had was a world in which interest rates had become very low, investors of all kinds - not just banks - were desperately searching for ways in which they could earn more return, so they took big risks. Those risks, some of them, went wrong.
"I would say to people, though, don't demonise individuals here. This wasn't a problem of individuals, this was a problem of a failure of a system. We collectively allowed the banking system to become too big, we gave it far too much status and standing in society and we didn't regulate it adequately by ensuring that they had enough capital. We have to put that right."
But Sir Mervyn raised concerns about the Chancellor's Help to Buy scheme, which will see the Government guarantee up to 15% of a mortgage on properties worth up to £600,000. The scheme, which starts in January 2014, is due to run for three years and Sir Mervyn warned it must not be allowed to become permanent.
He said: "I'm sure that there is no place in the long run for a scheme of this kind. This scheme is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market."