The former deputy chairman of HBOS accused the Bank of England yesterday of failing to support British banks through the global credit crisis.

Sir Peter Burt, who was chief executive of Bank of Scotland before its merger with Halifax to create HBOS, told the BBC’s Today programme that the Bank risked sending Britain into a “depression” because of its worries over moral hazard.

Speaking two days after the Bank was forced to make an unprecedented statement denying that any bank had sought emergency state funding, Sir Peter said that Mervyn King, its Governor, should “go the extra mile” by offering more cash and accepting a wider range of collateral, as had the US Federal Reserve.

Institutions have complained that its auctions of extra liquidity were sporadic and that it accepted only asset-backed securities based on AAA-rated credit card and mortgage debt. The Bank said on Thursday it would auction an additional £5 billion a week until April 9 and Mr King is thought to be sympathetic to the pleas for a more relaxed attitude to collateral.

Thursday’s auction was three times oversubscribed, while the auction of an extra £5 billion on Monday was almost five times oversubscribed, indicating the desperate need among Britain’s banks for additional liquidity.

The renewed attacks on the Bank’s handling of the credit crisis come at a time when it is involved in talks with the US Federal Reserve and European Central Bank that could yet see it surprise its critics with new measures.

Central banks are thought to be examining potentially radical action to combat continuing financial upheavals. There are suggestions they may consider large-scale purchases of the devalued mortgage-backed securities that lie at the heart of the turmoil.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive