"Although I believe our financial system is currently sound, the same thing that has happened in the US could happen in New Zealand in the future if we don't change our ways," he said today.
"The Reserve Bank Act needs to be changed so that we never end up needing the New Zealand equivalent of a giant bailout for the banking sector."
Mr Anderton, a senior cabinet minister, said US banks were able to keep lending beyond prudent levels for the economy and new financial instruments allowed debt to be repackaged so that risk was wrongly priced.
"Likewise in New Zealand, the Reserve Bank only controls the price of lending. There are no reserve ratios that control the level of bank liquidity," he said.
"When the debt bubble takes off, all our Reserve Bank can do is put up interest rates.
"But that attracts more overseas lending, which therefore continues to fuel the bubble, overvalue our dollar and increase the deficit in our account with the world."
Mr Anderton said the Reserve Bank's monetary policy criteria should be widened so it also considered the balance of payments, the rate of foreign exchange, the stability of the housing market and employment.
