The first payments under the Bank of England’s emergency liquidity assistance scheme were made on October 1, a week before the Government announced a massive rescue of the sector.

The money was repaid by January.

The news, disclosed in a letter to the House of Commons Treasury committee, is further evidence of how close the two Edinburgh banks were to collapsing last year because the rest of the market refused to give them funding.

Bank of England governor Mervyn King told MPs the money provided a “bridge” to the recapitalisation of the banks in October 2008 and January 2009.

He added that even now, support from the public sector to UK banks under various other schemes “runs into many hundreds of billions of pounds”.

He said: “It is right that householders and companies expect fundamental reform to the structure and regulation of the whole financial system.”

Treasury committee chairman John McFall said the news caused an “intake of breath”.

“How many universities, colleges, jobs could we support with this? It gives credence to the view that we really need to fix this situation.”

King said details of the emergency support was kept secret until the two banks had finalised their latest bail-out packages earlier this month.

The Bank first gave HBOS emergency cash on October 1 last year.

HBOS’s use of the scheme peaked at £25.4bn on November 13, even as veteran bankers Sir George Mathewson and Sir Peter Burt were campaigning for it to remain independent of Lloyds. It repaid all the money by January 16, just four days after a legal decision gave the merger the go-ahead.

RBS first received funding on October 7, the day after its shares fell 40% in just one trading session. It repaid it by December 16. Its use peaked at £36.6bn on October 17, when total lending to the institutions reached a high of £61.6bn.

In return, the banks handed over £100bn of mortgages and loans as collateral.

Threadneedle Street paid the Treasury a fee of 1.7% over the two months in order to access the cash.

Bank of England deputy governor Paul Tucker said: “This was tough stuff, a classic lender of last resort operation.”

Responding to claims by MP Jim Cousins that given the cost of the scheme, RBS and HBOS would have been “better off going to American Express”, Tucker said: “Yes, but American Express may not have been.”

He added that the £100bn of assets were taken to protect the Bank and the cost was to deter other institutions from making similar mistakes.

“It was effective in buying time,” Tucker said.

King criticised banks that have moved back into risky areas of investment banking as the financial crisis has eased, saying: “I have in one or two instances been concerned that banks, particularly those in receipt of Government support, felt it was attractive to go down the road of re-establishing an investment banking operation rather than what I thought their original intention was, which was to go back to good, old-fashioned commercial banking.”

He again called for action to ensure failing banks are allowed to collapse.

He said: “We cannot end up with a situation where any regulator feels, or any Government feels, that any institution is too important or too big to fail.”

He rejected the use of regulation alone to keep banks in check and said: “If regulators are that clever, why not let them run the banks?”