Bank's bosses are sorry now, but there's worse on the way

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The scale of the downturn in the past two months is quite staggering. In the first nine months of the year HBOS impairment charges stood at £3 billion. After 11 months they stand at £5.8 billion.

Remember, that is charges against bad debts in the bank's normal everyday business - lending to consumers, mortgages and loans to business. It's not the losses and writedowns from those toxic assets you could argue banks should never have gone anywhere near. If the subprime crisis drove banks to the wall (or in HBOS's case into the arms of Lloyds TSB) today's announcement makes it plain that the second phase of the banking crisis has only just begun.

HBOS makes it clear that economic conditions, and therefore its business, are bound to get worse. It also admits its capital ratios will fall again. Many people believe it will now make a loss next year as well as this one. Most analysts, quite rightly, viewed Lloyds TSB's statement in response that it regarded the trading update as "broadly consistent" with its own analysis of HBOS done in October, with huge scepticism.

Retailers, publicans and London taxi drivers will tell you that business really fell off a cliff in November. How could Lloyds have seen that coming? The takeover will go through. Today's numbers make that more inevitable. But what is becoming equally certain is that the Government's £37 billion bailout of HBOS, Lloyds and Royal Bank of Scotland will prove not to have been enough.

HBOS has yet to receive its £11.5 billion from the Government's purchase of new ordinary and preference shares. But it has already, in effect, spent almost £3 billion of it. At this rate the bailout won't even see it through to the end of 2009.