The former HBOS chairman Lord Stevenson has admitted the bank lent too aggressively under his watch, leading to its near-collapse in 2008.
Lord Stevenson said the company, which is now part of Lloyds Banking Group, was left over-exposed to the wholesale lending markets when they dried up during the financial crisis.
However, he rejected claims that his board had encouraged "high-risk, reckless lending".
"We failed, along with the rest of the world, to anticipate the protracted closure of wholesale markets," Lord Stevenson told a Parliamentary hearing in London yesterday.
"The worries we had were long-term worries. Had we thought for a moment there would be protracted closure of wholesale markets, we would have been forced to take action," he said.
HBOS merged with Lloyds Banking Group in 2009. The enlarged bank was eventually part-nationalised as the full extent of its toxic debts became clear.
Lord Stevenson said that he was "extremely sorry" for the costs incurred by taxpayers, staff and shareholders.
He appeared to anger members of the Parliamentary Commission on Banking Standards by focusing on the funding markets and not internal controls at the bank.
"What brought the bank down was the closure of the wholesale markets. The day after Lehman that was it," he said.
In response, Andrew Tyrie, the commission's chairman, described his evidence as "evasive, repetitive and unrealistic".
Lord Lawson, the former chancellor and a member of the commission, said: "You're living in cloud cuckoo land aren't you?"
His appearance came a day after Sir James Crosby – HBOS's former chief executive – said lending by bankers at the company had been "incompetent".Reuse content