EU internal market commissioner Charlie McCreevy has said he is worried that the increasing regulatory burden on non-executive directors will deter talented and experienced people from sitting on company boards.

Mr McCreevy said business scandals did untold damage beyond their immediately obvious impact but he added that regulators should challenge malpractice without stifling the economy.

While the former minister for finance said such scandals undermined the trust that must be at the heart of the financial system, he said increasing regulation would leave consumers with high audit and indemnity insurance costs.

"Across most of Europe, the business culture is generally ethical compared to many other parts of the world," he said.

Speaking at the annual graduation ceremony of the Chartered Institute of Management Accountants, he linked business scandals to increased pay levels at management grades.

"In some instances they seem to have enhanced the temptation and therefore the risk of account manipulation and led to corporate scandals," he said.

A qualified accountant, Mr McCreevy said regulators should challenge any absence of transparency without imposing unnecessary red tape on business.