The head of the bank which took over HBOS has revealed the rapid pace at which it accumulated huge losses came as a surprise.

Sir Victor Blank, who is chairman of Lloyds Banking Group, said losses at HBOS were at "the worst end of expectations".

In February Lloyds announced that HBOS would rack up a £10 billion deficit for last year.

The bank was rescued in a government-backed deal at the height of the financial turmoil last autumn.

Sir Victor said: "When we announced the deal in the middle of September, it did not feel like a rescue of HBOS.

"It felt like a wonderful opportunity."

Financial problems mounted after new government regulations required all the banks to have extra capital, he said.

"The Government changed the rules and the world changed."

"The speed with which problems came home to roost was greater than we would have anticipated because (of) the fall in Gross Domestic Product."

Market confidence in HBOS collapsed and the Government waived competition rules to allow the bank to be taken over by Lloyds.

The taxpayer has since pumped a total of £17 billion into the two banks to shore up their balance sheets.

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