Writing in the Times, Sir Ken McDonald slammed the "failed" Financial Services Authority (FSA) and the "struggling" Serious Fraud Office (SFO) and called for their replacement with a single City watchdog.
He also criticized legislators for ignoring financial crime - and the devastating impact it can have - in favor of pushing through draconian anti-terror laws that turn criminal justice into "an auction for fake toughness".
"If you mug someone in the street and you are caught, the chances are that you will go to prison. In recent years, mugging someone out of their savings or their pension would probably earn you a yacht," Sir Ken wrote.
The Times reports that a number of lawyers and former regulators have backed the calls for a new, tougher regulator.
Ex-SFO director Robert Wardle said fraud investigations have been "massively underfunded" in recent years and regulation would benefit from a merger of FSA and SFO.