In an interview with the Sunday Telegraph, the former Pensions Commission chief suggested that the industry has yet to fully take the lessons of the 2008 financial crisis and subsequent recession on board by reforming riskier practices.
"There are still important elements of the prudential regime to put in place, such as shadow banking: we have to do more work and the industry has got to accept that," he explained. "Society wants to be assured that measures have been taken."
However, he added that current rules on bonuses are "complicated" and in need of an overhaul, while accepting that implementing excessive punitive measures on remuneration could potentially drive top talent away from the UK.
Despite that, Lord Turner insisted that the idea leading companies would transfer their headquarters overseas to escape capital liquidity rules was a "fantasy" and stressed the importance of "robust" measures strong enough to avoid a repeat of the economic downturn.
His comments came after senior figures within the global financial sector told the World Economic Forum in Davos that over-regulation was crippling the ability of banks to innovate and play a role in driving the recovery forward.
Although Lord Turner largely disagreed with this view, he acknowledged that there remain "some issues on the margin" in relation to bonuses and called on chancellor George Osborne to implement a "proportionate response".
Last week, the Financial Times reported that Mr Osborne had been forced to back out of a tentative agreement on performance-related pay, after top Liberal Democrats Nick Clegg and Vince Cable deemed the deal unsatisfactory.
By Asim Shah