91Èȱ¬

In an exclusive interview with 91Èȱ¬ Two documentary series The Love Of Money tonight (Thursday 24 September, 9.00pm), Governor of the Bank of England Mervyn King reveals the true extent of the crisis that faced the UK a year ago in October 2008.

In London in the first week of October 2008, confidence in some UK banks' ability to continue to borrow the money they needed to survive began to evaporate. There were fears that UK banks HBOS and RBS might not survive.

Mervyn King, Governor of the Bank of England, comments: "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."

He describes the chilling consequences that would have unfolded if these banks had gone under.

"Individuals would not have had access to the money in that bank. Their deposits would have been frozen. The accounts would have not been there for salaries to be paid in to so many people would not have been paid their salary. In turn they wouldn't have been able to pay bills to businesses so the businesses would have found that their flow of payments would have come to an end." he added.

The programme hears from key players who found themselves in the thick of the crisis that faced the UK and the rest of the world's financial systems.

David Soanes, Managing Director of UBS Bank, was part of the group of City insiders, brought together by Baroness Shriti Vadera, to assist with the Government's response.

Speaking publically for the first time, he describes the desperate struggle to keep banks from going bankrupt on Tuesday 7 October 2008.

"We only really knew by probably about seven o'clock at night, that we, that everyone was going to get through to the next day," he said.

David Soanes also describes the initial meeting of politicians, civil servants and bankers who got together on Thursday 2 October 2008 to work out the details of the Government's recapitalisation plan.

"Her office rang up on Thursday morning. We were sort of expecting a call of sorts. We didn't quite know how it would work, but we realised that that weekend and the next few days were crucial."

He describes the meeting: "We were sitting there looking at one another, hoping somebody had the answer and so Shriti opened the meeting very simply saying that we needed a comprehensive solution, that confidence was clearly ebbing away, we didn't have much time."

Chancellor of the Exchequer Alistair Darling said: "I was in no doubt that the burden on our shoulders, that the gravity of the task we faced and it was, it is probably the worst situation as I say we faced in peacetime."

Ed Lazear, Chairman, Council of Economic Advisors (Economic Advisor to President Bush), said: "We literally thought that we were on the verge of the great depression and I, looking back I think we probably were."

The programme also lifts the lid on the strains that the crisis put on relations between different European governments.

Ireland's Minister for Finance, Brian Lenihan, reveals that bank chiefs told him that the entire Irish banking system was on the verge of collapse.

"We were anxious to avoid that at all costs. The policy options available to us were to immediately nationalise an institution. If we immediately nationalised that institution the risk was that it could lead to a systemic collapse of all the other institutions. We decided that the best course of action was the guarantee the six institutions which exclusively looked to Ireland for their protection," he said.

Without coordinating the decision with Europe Lenihan announced that Ireland would guarantee its banks. Therefore, anybody holding Euros could move them to Ireland with massive implications for the rest of Eurozone.

Just minutes before he went public, he called his French counterpart, Christine Lagarde.

Largarde described the Irish decision as "a bit of a shock".

"We had to very swiftly react to that, I had extended telephone conversations with colleagues to – to you know, sort of build up counter-measures," she said.

The Irish announcement also caught the UK Government off guard. British depositors were only guaranteed to get back £35,000 per account if a bank went bust. The Irish government was offering unlimited guarantees.

Alistair Darling said: "It just would have been a lot better if we had known in advance because we'd have had proper measures in place in the morning when the branches opened."

"France was concerned, Germany was concerned, the lesson that you draw here is you can't do these things on your own, you got to talk," he added.

The Love Of Money: Back From The Brink also describes the last-minute efforts to agree a rescue plan that went on in Washington DC and London against a background of deteriorating markets and increasing global panic.

Notes to Editors

Any use of information in this release must credit 91Èȱ¬'s Two's The Love Of Money.

The Love Of Money: Back From The Brink is the final programme in the three-part series from the Money Programme team.

PH