Lord Turner, the chairman of the Financial Services Authority, said that the regulator wanted a "significant shift" and "more intervention" in its approach to protecting consumers.

The FSA first raised the possibility of taking a more aggressive approach to protecting the public from being sold high-risk investments in March 2010.

Hector Sants, the FSA's chief executive admitted that it would have been better to have stopped some policies from being sold in the first place, rather than waiting until a scandal developed to address the problem.

The regulator says its aim now is to "reduce consumer detriment by dealing with problems earlier, scrutinising the whole of the product lifecycle from start to finish rather than just focusing on the point-of-sale".

"[This] might include interventions such as banning products or prohibiting the sale of certain products to specific groups of customers."

The financial services industry has seen several high-profile scandals over the past two decades including the mis-selling of policies such as personal pensions and mortgage endowments.

Consumer organisation "Which?" welcomed the FSA's latest move.

"Which?" has been campaigning for years for the FSA to tackle the problems at the heart of the industry - that many [products] are fundamentally useless or, even worse, toxic to consumers.

The FSA's consultation ends on 21 April 2011.