Britain's financial watchdog said it had no regrets about approving the appointment of Paul Flowers to chair the Co-operative Bank in 2010.
Last year the bank fell under control of investors, including US hedge funds, after a £1.5 billion sterling capital shortfall was exposed.
Its problems were exacerbated when former chairman Flowers was arrested as part of an investigation into the supply of illegal drugs.
"I don't think it was a mistake in terms of the decision I made at the time," Clive Adamson, director of supervision at the Financial Conduct Authority (FCA), told parliament's Treasury Select Committee today.
"There are lessons to be learned from what happened," he said. "Today he wouldn't be approved as we would look for more experience."
Britain's financial regulators have launched an investigation into problems at the bank and the probe could lead to fines for the bank and its former directors.
The investigation may also prove a test case for new rules being introduced in Britain which mean bankers who are reckless with customers' or taxpayers' money could face criminal charges and have bonuses and pensions clawed back.
Treasury Select Committee Chairman Andrew Tyrie said the regulator's decision to put a "financial illiterate" in charge of its board was a "negligent decision, a very poor decision".
Adamson said he was disappointed that at no time did anyone from the bank or public life alert the regulator about some of Flower's alleged misdemeanours.
Flowers, a Methodist minister with little experience in banking, was interviewed by regulators in 2009 when he joined the Co-op board as a non-executive director. A year later he became non-executive chairman.
Adamson said it was then a "somewhat unruly board" of 22 members and that it was important to have someone in place to better chair it.
"My view was that Flowers did have the competence to perform the role of non-executive chairman," Adamson said. "Our view is that a non-executive chairman does not run the bank but run the board."
Adamson said he went beyond what was required by meeting with Flowers in 2010 when he was appointed chairman to secure agreement to appoint two deputy chairmen with financial experience.
Adamson acknowledged that parts of the 2010 interview with Flowers was a "box ticking" exercise and that improvements to how appointments are approved have been made since then.