For a bank’s share price to fall 35 per cent in two days is alarming at the best of times. And these are far from the best of times. So it would not be surprising if HBOS’s 15 million depositors were nervous about their savings. They have no cause to be.

After the collapse of Lehman Brothers, it was only to be expected that hedge funds would play “who next?” and look around for the next bank that was most likely to get into trouble. Or, rather, look for the bank that other investors might fear was the most likely to get into trouble. So they plumped for HBOS.

They did so because HBOS is the big British bank most exposed to the housing market. It also funds more mortgages than its rivals by borrowing money rather than from savers’ deposits. The credit crunch has made it much more difficult to borrow from other banks – as Northern Rock found to its cost. Northern Rock was much more dependent on such funding than HBOS and when it dried up, the bank crumbled and was eventually taken over by the Government.

But, as has been confirmed by the Financial Services Authority, HBOS has had no problems funding itself so far. And, in fact, its need for funding in the short term is less than some other big UK banks. Having raised £4 billion from investors recently, it is also the best-capitalised domestic bank.

But what if, like Northern Rock, it did get into trouble? All banks are based on confidence. If savers lost confidence in HBOS, they would take their savings out which could precipitate a crisis. That is precisely why British bank depositors have the first £35,000 of their savings guaranteed. And that is why, when Alistair Darling said the Government would guarantee all Northern Rock deposits, he added that he would take similar action to prevent a run on any other big savings banks.

The Chancellor has not repeated that guarantee, perhaps because that might worry savers more. But when he says the Government will take any action required to preserve the stability of the financial system, that is what he means.

Some advisers are telling clients that it is sensible not have more than £35,000 with any one institution. But it is inconceivable that the Government would allow ordinary savers to be left out of pocket in the event of a problem at any big British bank.

So HBOS savers should sleep easy. HBOS shareholders, on the other hand, should expect the bumpy ride to continue.

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