The chief executive of Bradford & Bingley (B&B) was likened yesterday by MPs investigating the collapse of the mortgage lender to the weather forecaster who missed the 1987 hurricane

John McFall, chairman of the Treasury Select Committee, accused Richard Pym of making misleadingly confident statements only two days before the bank submitted to a state-backed rescue.

“Is it fair to describe yourself as the financial services industry's Michael Fish?” Mr McFall asked. “You were struck down by a storm and a hurricane that took everything away.”

The reference was to the Met Office weatherman who, during a BBC weather forecast in 1987, dismissed suggestions that a hurricane was on the way - hours before it devastated southern Britain.

Forty-eight hours after saying that B&B was strong and fit for purpose on September 25, Mr Pym agreed with the Financial Services Authority that the bank was so weak that it had to be nationalised, devastating shareholders.

“That's dramatic,” Mr Pym said. “I can sympathise with people who say that I may have been misleading.”

Mr Pym and Rod Kent, the chairman at that time, told MPs that circumstances were altered by anxious depositors withdrawing their savings. On the Thursday of the statement, a net £26 million was withdrawn; on the Friday, a further £90 million was pulled and on Saturday morning a further £200 million was pulled.

After Halifax agreed to a rescue takeover by Lloyds TSB, media attention swung to B&B, Mr Pym said. “Poor little B&B was the last mortgage bank standing and was always going to be the centre of media attention, and there was a loss of [depositor] confidence.”

A blog by Robert Peston, the BBC's Business Editor, suggesting that B&B might have to be rescued was the final straw. “We saw Robert Peston's blog at 4.50pm [on the Friday] and I think we realised things weren't looking that good,” Mr Pym, who was appointed in August, said.

Mr Kent, the chairman of B&B until last week, apologised to MPs for the board's stewardship of the company, whose reliance on wholesale funding and push into specialist mortgages led to its demise.

“The board accepts it is fully accountable for what happened,” he said. “We are deeply disappointed and massively sorry about what happened.”

Mr Pym said that B&B had expected to suffer total losses of £600 milllion to £800 million from the housing market downturn after stress-testing its £40 billion mortgage book. However, that estimate was based on an assumption that house prices would fall by 25 per cent. “We're now stress-testing for a much larger fall in house prices,” he said. He could not guarantee that losses would not be larger.

B&B's branch network and savings business were sold to Banco Santander, of Spain, and the £40 billion mortgage business has been put into run-off as a result of the nationalisation decision in late September.

The remaining 1,100 staff are in line for a bonus of 9 per cent of salary, it emerged during the hearing. MPs questioned the fairness of the staff bonus system, given that senior executives had been allowed to accrue bonuses of 150 per cent of salaries.

In 2007, executive directors were paid £3.77 million. Mr Kent defended the payments: “At the time, we were trading quite well.” No executives would receive bonuses this year, he said.

Jim Cousins, MP, expressed astonishment at the deal with GMAC, the American loans group, under which B&B continued to have to buy from it mortgages of inferior quality. By spring 2009 the Government would be the proud owner of £7 billion of such mortgages, he said.

Ron Sandler, chairman of Northern Rock, who was also questioned by MPs , denied that staff incentives were responsible for the nationalised bank's high rate of repossession. Less than 1 per cent of income came from home repossessions, he said. Staff bonuses were “categorically not” given for seizing people's homes.

Rock's “Together” mortgages, which gave borrowers the ability to borrow up to 125 per cent of their home's value, were causing concern, Mr Sandler admitted. The loans comprised 30 per cent of Rock's total loanbook, but represented 75 per cent of repossessions.

Mr Cousins suggested that Rock might be at a disadvantage to other state-rescued banks because of the tougher terms it faced on its debt.

Northern Rock was nationalised in February after an abortive attempt to find a private-sector rescuer. Mr Sandler said that there was no chance of it being returned to the private sector in the near term because of deteriorating market conditions. He said that Rock had not been subject to government interference since being nationalised.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts