Two British bank giants, HBOS and Royal Bank of Scotland, were on the verge of collapse in the second week of October, the BBC has revealed.

The BBC’s Panorama programme went on to interview the Chancellor, Alistair Darling as well as John Varley head of Barclays about the weekend that the bank rescue plan was put together and the events that lead up to it.

I am not a fan of Alistair Darlings plans to re-start the UK economy, but the bank rescue was very well done and we all owe those involved our thanks. What comes out in the interview is that the UK banks near collapse was triggered by Lehmans, but it was a loss of investor/lender confidence not direct exposure to Lehmans that was the problem. There is also an implication that the rescue plans had been in development since the previous year as a fall back plan in case of need following on from Northern Rock. The response of the world to the plans and the change of approach in the US from an asset purchase to a capital investment lead approach has probably prevented a melt down.

John Varley comes across well, but not much by way of convincing explanation as to why the board would rather give away sweeteners and pay extra to an Arab sovereign wealth fund for its rescue package rather than be bailed out by the Government. The deal was good for the directors, but a poor one for the existing shareholders unless you believe the UK government will find the temptation to meddle greater than the temptation to the sovereign wealth funds to do the same.