Last week, the Parliamentary Commission on Banking Standards produced an excoriating report on the three executives of HBOS whose "catastrophic" errors brought the once-respected Bank of Scotland to the brink of collapse.

The rot, however, goes beyond individual banks to the audit and regulatory systems.

In the wake of the report, Sir James Crosby, a former chief executive of HBOS, has announced he will relinquish his knighthood, give up one-third of his pension and step down from a directorship. This is a welcome act of atonement. Five years on from the banking crisis, however, it will be seen as too little and too late from the man identified by the commission as the architect of the strategy that led to the bank requiring a £20 billion bailout from the taxpayer. Since he will still have around £400,000 a year from the extraordinarily generous pension that was part of his contract, he will hardly have to suffer for his disastrous failure.

This illustrates the limitations of the current regulatory framework. Sir James has done the honourable thing on a voluntary basis and the other former HBOS executives condemned in the report, chief executive Andy Hornby who displayed "reckless incompetence" and the "delusional" chairman Lord Stevenson, should lose no time in following his example. But a mechanism to ensure individuals are held to account is urgently required. Public opinion remains outraged at the behaviour of bankers because the Financial Services Authority (FSA) failed to claw back multi-million pound bonuses from people whose errors of judgment have cost the public billions. Vince Cable, the Business Secretary, wants to follow the recommendation of the Commission on Banking Standards and ban the former directors from holding regulated roles in financial services. That should be an automatic requirement.

Questions remain about the oversight of the financial health of HBOS. It is not only the directors but the auditors who should be held to account. The announcement of a possible investigation by the Financial Reporting Council into the role of accountants KPMG who signed off HBOS accounts in the run up to its collapse is a sign that the authorities have finally recognised the need to probe the murky depths of the banking collapse. The Financial Conduct Authority (FCA), successor to the FSA, will present its findings on the bank's failure in the autumn. The Commission on Banking Standards has led the way in naming and shaming those at the helm and the FCA must take an equally tough approach. Before it does so, it must thoroughly consider the position of its chairman John Griffith-Jones, who was chairman of KPMG when it audited HBOS. The need for professional expertise means most regulators are likely to be poachers turned gamekeepers but, as a new regime, the FCA cannot afford to be open to accusations of replicating too cosy a relationship with major financial companies of the sort which saw Sir James leave HBOS in 2006 and become deputy chairman of the FSA.