Alistair Darling: ‘RBS said it would run out of money in early afternoon’

Alistair Darling has revealed his “most scary moment” of the financial crisis, which began a decade ago.

The former Labour chancellor of the exchequer said he received a shocking phone call from Royal Bank of Scotland in 2008, revealing a run on the bank.

He told the BBC: “I had to go to one of these meetings of European finance ministers, and I was asked to come out and take a call from the then chairman of RBS [Tom McKillop], who said the bank was haemorrhaging money.

“Remember this was not only the biggest in the world, it was about the same size as the entire UK economy.

“I said to him: ‘How long can you last?’ And what he said to me shook me to the core. He said: ‘Well we’re going to run out of money in the early afternoon.’”

Lord Darling said there would have been “blind panic” had the government not intervened. RBS was bailed out by taxpayers later that year, and the government still owns a 71% stake in the bank.

He added that the biggest danger regarding a future crisis was complacency.

“In a few years’ time, when institutional memories start to fade and the people around have all gone and retired, then that’s where the risk occurs,” he said.

Yesterday marked the 10th anniversary of the decision by BNP Paribas to suspend three of its funds with major exposure to bonds backed by US sub-prime mortgages. The French bank said at the time it was unable to place a value on them because the market for these products, or “securities”, had dried up.

Jack Lew, the former US Treasury secretary and an adviser to Barack Obama during the financial crisis, recalled the intensity of the situation as it unfolded.

“I’d never seen a situation where every single day numbers were so much different and worse than the day before that you had to come back and keep revisiting how much fiscal stimulus the economy would need in order to stimulate a recovery,” he told BBC Radio 4’s Today programme.

He said there was a danger in the US of an emerging resistance against tougher banking regulations introduced in the aftermath of the crisis, as memories of the turmoil begin to dim.

“One thing I worry about is that the memory of the financial crisis, as we approach the 10-year mark, is starting to fade a bit.

“We all know that crises will come in the future, what we don’t know is when and how. What Wall Street reform did was for the first time since the Great Depression gave us the ability to have tools where we could deal with an evolving financial system to have the safeguards that we need. Even before [the US presidential] election you saw a great pushback among many, saying this has gone too far.”

He said it would be difficult to predict how a future crisis might unfold.

“The risks of the future are unlikely to come from the precise places that they’ve come in the past. In a rapidly evolving financial system new risks can develop out of things that don’t appear initially, that don’t appear to contain that kind of possibility.”