Rolls-Royce's financial director Mark Morris said banking regulators must engage with companies to understand the stresses on the 'real economy'.
Speaking at the British Bankers' Association conference in London on Wednesday, Morris said global regulators were guilty of not looking beyond their banking remits, which was limiting their vision of what he called "total system risk".
"There is a fine balance between stability and growth, which we believe is being over looked by the regulators," Morris said.
"We need smart regulation, not reactive regulation. We operate in global markets and we need global regulation, which isn't happening at the moment."
A much wider thought process needs to be adopted, Morris continued, adding: "When you have risks that sweep across non-financial sectors...trying to get them all coordinated to talk to the financial regulators is (difficult) - and who does the regulator talk to when it wants to speak to the 'real economy'?"
Morris concluded by saying the UK financial regulator, the Financial Services Authority, had been good in promoting companies' causes but other regulations, such as the Markets in Financial Instruments Directive (Mifid) could undo all the UK regulators' work.