The City watchdog has warned investment banks to spare the back office in future rounds of job cuts and instructed the industry to tighten up its controls in the wake of “a large number” of serious mispricing incidents on trading floors over the past year.

The Financial Services Authority’s heightened focus on controls follows internal probes at Credit Suisse, Lehman Brothers, Merrill Lynch and Morgan Stanley into unusual or inflated valuations of complex and illiquid credit and equity securities.