Darling defends British handling of banking crisis

British finance minister Alistair Darling has defended the government's bailout of crippled banks after one of the institutions involved said it expected to make huge losses.
Lloyds Banking Group warned Friday that its HBOS division would suffer a 2008 pre-tax loss of ten billion pounds (11.2 billion euros, 14.5 billion dollars) because of the credit crunch.
LBG's share price slumped by more than 40 percent in reaction to the surprise warning from the partly-nationalised bank.
The group, which was created earlier this year from the merger of Lloyds TSB and the crisis-hit HBOS, is 43-percent owned by the British taxpayer after a major recapitalisation.
Darling said the government had had "no alternative" but to act swiftly last year to prevent the bank's collapse.
"The problem we had last October was we had a banking system which was about to collapse," Darling told BBC television.
"We had to intervene. We had to do it very quickly. We didn't have months or weeks to do it.
"Now what we have asked the new management to do is go through the books, so we can deal with the assets that have gone bad and the other problems that have emerged."
Darling, who was attending a G7 finance ministers' meeting in Rome, added: "If we had not intervened, then we would have been having a very different conversation today, because the banking system would have gone down, taking with it millions of families and millions of businesses."
Britain's bailout of banks has been hailed by Prime Minister Gordon Brown as a blueprint for other countries' plans.
LBG said the massive losses were caused by the tumbling value of HBOS assets and a 7.0-billion-pound writedown on its corporate division.
An analyst, Martin Slaney, head of derivatives at GFT, said: "This merger is turning out to be the merger from hell for Lloyds.
"The figure for the expected losses is a good five or six times worse than the market was expecting and dispels any view that the worst of the writedowns are over," he added.
However, LBG added that its former Lloyds TSB division would make an annual pre-tax profit of about 2.4 billion pounds for 2008.
"Lloyds TSB traded profitably and satisfactorily in 2008 and expects to report a profit before tax from its continuing businesses... of some 2.4 billion pounds," it said.
But in afternoon trade, LBG's share price plunged 41.36 percent to 53.30 pence before pulling back to close at 61.40 pence, down 32.45 percent from Thursday.
London's FTSE 100 index finished 0.30 percent lower at 4,189.59 points.
"HBOS's 2008 results have been adversely affected by the impact of market dislocation, which accelerated significantly in the last quarter of 2008, and the additional impairments required on the HBOS corporate lending portfolios," said LBG Chief Executive Eric Daniels.
"These impairments primarily reflect the application of a more conservative recognition of risk and the further deterioration in the economic environment."
The news comes days after HBOS's former bosses apologised this week to British lawmakers for failing to foresee the global financial crisis that led to their institutions being bailed out.
Former HBOS chairman Dennis Stevenson told parliament's Treasury Select Committee, which is investigating the crisis, that he and former chief executive Andy Hornby were "profoundly sorry."
Friday's trading update came ahead of LBG's annual results statement which is due on February 27.
Royal Bank of Scotland, which is almost 70-percent owned by the British government, warned this month of a 2008 loss of up to 28 billion pounds.