The Treasury select committee paper concludes that the meltdown had been fuelled by a culture of overconfidence, over-optimism and "misplaced faith in financial innovation".
MPs also slammed the banking industry for "stifling" opinions that challenged their increasingly cavalier attitudes to risk, saying they had made an "astonishing mess" of the financial system.
In addition, institutions were criticized for engaging in over-the-counter trading despite having only a "shaky grasp" on where assets were, what they actually comprised and how much they were worth.
The committee added that failures by individual banks were compounded by the wider failure of the supervisory mechanisms designed to protect the public from systemic risk.
In order to rebuild shattered public confidence in the financial system, the regulatory regime for "all types of banks" needs to be strengthened and improved, the report concluded. It also called for a debate on Bank of England governor Mervyn King's call for the reinstatement of the separation of retail and investment banking services.