"We did spot some crazy borrowing going on ... and we said, actually, for a couple of years before the crash that a correction was coming," John Gieve told the BBC .
But, he added: "We didn't think it was going to be anything like as severe as it turned out to be."
Gieve said the bank didn't have the ability to stop the crisis from happening, and called for new tools for the bank to control the financial sector.
"One of the main lessons from this is that we need to develop some new instruments, which sit somewhere between interest rates, which affect the whole economy ... and individual supervision and regulation of individual banks," he said.
He said that if the bank had tried to use interest rates to keep the price of assets — like houses — from spiraling upward over the past couple of years, it would have held down the level of activity in other parts of the economy, like manufacturing, that needed to be allowed to enjoy prosperity.