The bosses of Britain's biggest banks asked for extra financial support from the Bank of England yesterday, amid deepening gloom in the City. Senior executives from the five largest retail banks – Barclays, HBOS, HSBC, LloydsTSB and Royal Bank of Scotland – met Mervyn King, the Bank's Governor, to urge him to do more to help them through the credit crisis.
Angela Knight, chief executive of the British Bankers' Association, said banks were concerned that Mr King had not offered them sufficient support during the credit crisis, which began more than a year ago. "It's no secret our members think regulators have not moved as quickly as they might," Ms Knight said. "The Bank has certainly not moved as quickly as the US Federal Reserve."
The Bank of England, as well as the Financial Services Authority and the Treasury, has faced fierce criticism since the collapse of Northern Rock last autumn, when a rescue bid for the mortgage bank from LloydsTSB was vetoed by regulators concerned that they would have to underwrite large liabilities.
Mr King was also initially reluctant to sanction large-scale injections of cash into the UK's money markets when funds dried up after the Northern Rock crisis. By contrast, bankers pointed out yesterday, both the Fed and the European Central Bank have pumped huge sums into their money markets to help US and European banks through the worst of the credit crisis.
When the US investment bank Bear Stearns did come close to going to the wall last weekend, the Fed helped engineer a rescue bid from JP Morgan and accepted it would have to act as a lender of last resort.
However, the Bank of England has repeatedly insisted that it cannot simply bail out every bank that gets into difficulties, because there would otherwise be little incentive for the sector not to take too many risks in the first place.
Mr King has also sanctioned a series of interventions in the money markets, providing a further £5bn of short-term funding yesterday. The Bank offered an almost identical facility only three days ago.
A spokesman for the Bank refused to discuss the substance of yesterday's meeting with the banks, confirming only that it was held. Privately, senior officials at the Bank are concerned that the meeting has come to be seen as a crisis summit.
Although the meeting was scheduled some time ago to discuss a range of issues, inaccurate rumours that bank bosses were planning to discuss a bail-out of one particular bank sparked a panic on the stock market on Wednesday, with shares in HBOS falling by almost 20 per cent. The Financial Services Authority subsequently accused speculators of deliberately planting false rumours in order to profit from the crisis.
However, while the suggestion that HBOS is in financial trouble was utterly unfounded, leading banks are continuing to suffer from the worldwide effects of the credit crisis, with thousands of job cuts now predicted in London and elsewhere.
Doug McWilliams, the chief executive of the Centre for Economic Business Research, which predicted three months ago that the credit crunch would cause the loss of 6,500 jobs in the UK's financial sector, now believes the figure could be nearer 10,000.
"Previously we thought it would be a slightly more limited number of jobs that would be lost but confidence is rather weaker than we assumed," Mr McWilliams said. "On what we can see now, the number of job losses will be higher. It is all to do with confidence, and confidence is one of these things that is tremendously fragile and volatile."
Banks including Citigroup, Morgan Stanley, Goldman Sachs, Deutsche Bank and Merrill Lynch have already cut staff numbers worldwide and yesterday employees of Credit Suisse were warned to expect job losses as the Swiss investment bank revealed that it expected make a loss in the first quarter of the year.