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A former head of the Financial Services Authority and a founding member of the Bank of England's Monetary Policy Committee have been recognised in the New Year Honours.

Hector Sants, who was in charge of regulation at the start of the credit crisis, has been knighted.

It is in recognition for services to financial regulation.

Sir Alan Budd, who was on the first Monetary Policy Committee in 1997, is promoted to knight grand cross.

Sir Hector said his award was a "testament to the hard work of everyone at the FSA during the crisis, their willingness to learn lessons and to bring about the changes that were necessary".

Sir Hector began his City career as a stockbroker at Phillips and Drew, later taking senior positions at the investment banks UBS and Credit Suisse.

He took the job as head of the FSA two months before the collapse of Northern Rock in 2007, which was followed by huge government bailouts for two leading banks, Royal Bank of Scotland and Lloyds TSB.

MPs criticised the FSA for its handling of regulation during the credit crunch and accused it of being "asleep at the wheel", but he has also been praised for his work at the regulator and for pressing banks to boost their reserves.

Sir Hector is joining Barclays bank in January to improve the bank's reputation with governments and regulators internationally.

He will be directly responsible for making sure all its 140,000 staff obey the law in the more than 50 countries where it operates and that it is held in higher esteem by governments and regulators.

While at the FSA, Sir Hector personally warned the then chairman of Barclays, Marcus Agius, that Bob Diamond might not be a suitable choice to become the bank's chief executive in 2010.

He also conveyed the FSA's worries about the bank's culture, including the attitudes of its most senior staff to risk-taking, tax laws and banking regulations.

Earlier this year, the FSA fined Barclays £59.5m for its part in the Libor rate-rigging scandal, after which Mr Diamond left the left the bank.

Entrepreneurship recognised

Sir Alan, a professor of economics, has been made a Knight Grand Cross of the Order of the British Empire, for services to economic policy and the Office for Budget Responsibility.

He was made a Knight Commander of the Order of the British Empire in 1997.

Sir Alan was also the first chairman of the government's independent forecasting body, the Office for Budget Responsibility (OBR), but left after just three months in the job.

He was an adviser to Chancellor Norman Lamont during the Exchange Rate Mechanism crisis of the early 1990s and headed the inquiry into whether former Home Secretary David Blunkett misused his position.

He also headed the inquiry into the UK's gambling laws which led to their liberalisation.

Sir Alan Budd's career has also linked him with Barclays and Credit Suisse.

He was senior economic adviser to Barclays in 1989-1991, and is currently a senior adviser to Credit Suisse First Boston.

Industry and the economy make up 12% of the New Year Honours list, with Priscilla Newell, Chair of the Royal Mail Pension Trustees, becoming a dame and Sherry Coutu, a long-time supporter of UK start-ups, a CBE for services to entrepreneurship.

Harriet Vine and Rosie Wolfenden, co-founders of cult jewellery brand Tatty Devine are made MBEs.