A LLOYDS TSB rescue of Northern Rock could have stabilised the UK banking system, the bank's former audit committee chairman Ewan Brown has said.
Mr Brown, who chaired the committee between 2002 and 2009, has confirmed that the Bank of England and Treasury refused to underwrite a Lloyds rescue bid just before Northern Rock crashed in September 2007.
"We should have been allowed to buy Northern Rock," Mr Brown said.
"It would not have averted the crisis, but the year that followed Northern Rock was a continued year of excess, and if the issue had been gripped in a different way, it probably would have helped the whole regulatory system."
On the sales culture at Lloyds, which has led to the bank so far making provisions of £7.3 billion for the mis-selling of payment protection insurance, Mr Brown said: "The basic banking product was relatively unprofitable, selling insurance began to be a reasonably profitable line, and the FSA knew this was happening.
"The pity, perhaps, is none of the banks were able to take a lead during a really boom period.
"Charging fees would have been the way to do it, rather than free banking, and I can remember this being debated quite frequently at Lloyds."
Mr Brown said: "The day Lehmans went bust, as chairman of the audit committee I asked for a schedule of all our off balance sheet exposure, everything we had, I got the list at half past nine next morning.
"Lloyds knew exactly what the exposures were, I headed that committee for seven years and never had a single surprise."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article