MercoPress. South Atlantic News Agency

Bank of England reveals dramatic moments from the October crisis

Mervyn King, sailing in un-chartered waters

Two UK banks almost collapsed in October last year, the governor of the Bank of England has revealed. HBOS - now part of Lloyds Banking Group - and RBS were within hours of going under, Mervyn King told BBC Two's The Love of Money program.

Just days after the near-collapse, the government launched a £37 billion rescue package for banks, taking stakes in RBS and the merged Lloyds TSB and HBOS.

The chancellor has called the situation “the worst faced in peace time”.

Mr King described how strains in the money markets came to a head on 6 October and 7 October last year.

“Two of our major banks which had had difficulty in obtaining funding could raise money only for one week then only for one day, and then on that Monday and Tuesday it was not possible even for those two banks really to be confident they could get to the end of the day,” Mr King said.

He went on to describe the consequences if the banks had run out of liquidity.

“Individuals would not have had access to the money in that bank. Their deposits would have been frozen,” he said.

David Soanes, managing director of UBS, was part of a group of city insiders brought together by then business minister Baroness Vadera to assist with the government's response.

“We only really knew by about 7 o'clock at night, that we, that everyone was going to get through to the next day,” he told the program.