Nobody can accuse Lord Turner of Ecchinswell of shirking a big challenge. In the past few years, the former McKinsey consultant has tackled Britain's pensions problem and formulated the country's response to global warming. Since last month, his in-tray also includes trying to sort out the credit crisis.

Lord Turner formally took over as chairman of the Financial Services Authority, Britain's financial watchdog, at midnight on Saturday, September 20, six days after the collapse of Lehman Brothers (NYSE: LEH - News) set off a sequence of events that led to a worldwide crisis of confidence.

In the following three-and-a-half weeks he was involved in nationalising Bradford & Bingley, the mortgage lender, helped design the UK government's £400bn ($690m) banking bail-out and dealt with the fall-out from the failure of Iceland's financial system.

Last weekend, he flew to Washington, supposedly to discuss the global response to the crisis with central bankers and regulators at the Financial Stability Forum. However, he spent much of the time on the phone to London as the government, Bank of England and FSA finalised the injection of £37bn into Royal Bank of Scotland, HBOS and Lloyds TSB.

Last June, when he accepted an offer to replace Sir Callum McCarthy at the FSA, Lord Turner assumed that the worst of the financial crisis was over. But in his first in-depth interview since taking charge, he admits to being shocked by the events of the past month. "I had never seen, and nobody had ever seen, this extraordinary thing where confidence goes," he says. "Nobody had seen a money market squeezed like that."

Though markets are still absorbing the consequences of the rescue operations mounted by governments on both sides of the Atlantic, Lord Turner is confident that the financial system is no longer at risk of complete collapse.

He acknowledges that the need for urgency means the authorities' response may not have been perfect. But he maintains that radical moves, such as the FSA's decision to force the UK's largest banks to boost their capital reserves by almost £50bn, were necessary. "I'm confident that even if the economic historians suggest there could have been something slightly different, what was done was what had to be done, and had to be done to prevent what was a tailspin of confidence in the financial system."

He hopes the bank rescues will buy politicians, regulators and central bankers some time to debate a longer-term response to the crisis. Lord Turner accepts that coming up with a co-ordinated global solution will be complicated, because of the many institutions that share responsibility for overseeing the global financial system. "I've become aware of how many different bodies I can go to meetings of," he says. "It is a complicated institutional infrastructure for making progress."

For someone who has been in the job such a short time, he displays an impressive grasp of the macroeconomic roots of the credit crisis and a detailed understanding of the issues that will need to be debated in the coming months.

He advocates tackling a range of topics, including the limits of mark-to-market accounting, the need for a new system for setting banks' capital and liquidity, an overhaul of incentive systems used by investment banks and the strengths and weakness of the system of originating and distributing financial risk.

But he warns against simplistic solutions to what is a complex global crisis: "One must avoid saying: it must all be about bankers' bonuses," he says.

Given the scale of the task it is hard to know where to start. For the FSA, however, the most pressing challenge will be how it sets banks' capital requirements in future.

Lord Turner is unapologetic about the decision to set aside years of detailed modelling in forcing the banks to recapitalise. "We reached a conclusion that we couldn't simply proceed on the rules we had proceeded on in the past, because there had been a crisis of confidence so big that you had to rapidly agree a level of capitalisation so large that no rational person would be worried about lending to these banks," he says.

It is unclear how long the new approach will remain in place, but it seems unlikely that the FSA will go back to the previous approach where large banks measured their own risks. Indeed, it is not even clear when a global framework might be reintroduced. Didn't it take international regulators nine years to agree the current Basel II framework? Lord Turner smiles: "We'll have to do it a bit faster than that."

As he is speaking, world stock markets are in retreat as investors increasingly realise the banking bail-outs may have come too late to avert a severe slowdown. But he insists that it could have been much, much worse. "If we had allowed that to turn into a systemic failure of major banks, with a long-term impact on confidence in the banking system, then we could have had something much more serious."