The Financial Services Authority is to publish an internal review of how it monitored Northern Rock's financial health prior to its problems last year.
The UK financial watchdog, the Financial Services Authority, has admitted that it failed to adequately regulate Northern Rock.
It is expected to disclose shortcomings but not in the financial regulator's overall approach to supervising banks.
The FSA said there was "a lack of adequate oversight and review" by the agency of the troubled bank.
One of its conclusions is expected to be that too few regulators were assigned to monitor Northern Rock.
It said too few regulators were assigned to monitor Northern Rock, which ran into trouble in September.
A substantial increase in the amount of money set aside for monitoring banks is expected as a result of the review.
The FSA said it would be overhauling its procedures as a result of the weaknesses identified.
'Salary issue'
Newcastle-based Northern Rock was nationalised in February after the credit crisis forced it to seek a Bank of England lifeline to fund its mortgage loan book
The review, which was carried out by the FSA's director of internal audit, is expected to conclude that too few staff were monitoring Northern Rock at the time its problems began and there was a lack of stability in the supervisory team.
I think our regulator, similar to the wider banking community, simply got caught out by a set of circumstances which frankly none of us forecast Mortgage expert Michael Bolton
The review is also likely to say those supervising Northern Rock failed to heed warnings from other parts of the FSA that conditions in financial markets were becoming turbulent.
The FSA is expected to say it will learn from its mistakes and more resources will be devoted to monitoring important banks.
The Labour MP John McFall, who is chair of the Treasury Committee, said the FSA had a problem keeping decent staff - because they could earn more elsewhere in the City.
"They can shut the door on the FSA and walk along and get two or three times their salary, and that is an issue here," he said.
"But if we want a functioning market, if we want the confidence of London to be retained as a financial market, then we need good regulators - and I think the FSA will realise that they've had insufficient quality to date."
'Caught out'?
Michael Bolton, of mortgage firm Edeus, said the financial regulator could not be blamed for not having seen the global credit meltdown coming.
"I don't think it's right to point the finger too much at the FSA," he said.
"I think our regulator, similar to the wider banking community, simply got caught out by a set of circumstances which frankly none of us forecast, and we are still facing that same situation today."
Newcastle-based Northern Rock was nationalised in February after the credit crisis forced it to seek a Bank of England lifeline to fund its mortgage loan book.
Last week it said it would cut about 2,000 jobs by 2011 and reduce its residential mortgage lending by half under plans to turn around its fortunes.
Last week it said it would cut about 2,000 jobs by 2011 and reduce its residential mortgage lending by half under plans to turn around its fortunes.
Northern Rock must also pay back Bank of England loans worth about £25bn.
Northern Rock must also pay back Bank of England loans worth about £25bn.
The review, carried out by the FSA's director of internal audit, identified waht it said were a number of areas for improvement in its supervision of banks.
As a result, it plans to beef up its team with staff that will regularly review the supervision of of all "high-impact" firms to make sure procedures are being adhered to.
