Desperate times call for desperate solutions. In its effort to stabilise credit markets amid the turmoil of the 2007-09 crisis, the Bank of England pulled out all the stops, fearing contagion, which could bring several High Street banks tumbling down.

In this febrile atmosphere successive deputy governors Sir John Gieve and Sir Paul Tucker manned the barricades to preserve stability.

The 2012 Commons hearings on manipulation of the Libor interest rates discovered that Tucker was in regular contact with Bob Diamond at Barclays about calming the daily process of setting interest rates. It has subsequently emerged that Gieve and Tucker may also have sought to stabilise the auctions for funding under which banks offered up assets, such as mortgages, in exchange for cash.

New broom: Governor Mark Carney was determined to clean the stables when he arrived in 2013

The worry was that if depositors were to discover that the lender they did business with was very short of cash assets it could become stigmatised, causing a loss of confidence and a potential run. Indeed, it would be possible to argue that acting as firefighter has always been part of the Bank of England’s role as ‘lender of last resort’.

In the past it would have been the twitch of an eyebrow rather than a phone call which would achieve the desired effect. Lord (Tony) Grabiner QC, who was called in to look at matters, clearly was not entirely convinced of the integrity of what was done. The result is that ten Bank of England officials, including grandees Gieve and Tucker, have been interviewed by the Serious Fraud Office (SFO).

It is highly unusual for former deputy governors to find themselves sucked into such a probe. It speaks well of Governor Mark Carney’s determination to clean the stables when he arrived in 2013 and the willingness of SFO chief David Green to tackle difficult issues.

If there is a problem with this process, some might unkindly suggest it is with Lord Grabiner. This is the same legal eagle who was absent from his boardroom seat as chairman at Taveta, Philip Green’s private company, when BHS was sold to former bankrupt Dominic Chappell for one pound.

Lloyds shadows

The main excitement at Lloyds Banking Group these days come from the racy private life of chief executive Antonio Horta-Osorio.

The overall performance of the bank has become deadly dull, which may be no bad thing given the recent past of British banking and the recent experience of its American equivalent Wells Fargo when it tried to whip up extra earnings by creating legions of false customer accounts.

Hanging around Horta-Osorio’s neck like an anvil is the legacy of payment protection insurance (PPI) claims. Another set aside of £1bn brings the total cost to Lloyds shareholders (including the taxpayer) to £17bn. As it was the Lloyds chief who opened the door of the whole sector to compensating consumers, it is very much a case of ‘sow what you reap’.

On paper at least, Lloyds ought to be a goldmine for investors with its domination of mortgage, current account and savings markets. But it doesn’t really work like that in an era of low interest rates.

Similarly, the earnings from free money in current accounts are negligible.

You have to search quite hard for positives from third-quarter Lloyds data. Profits were down 15 per cent on the same quarter of last year, there were new bad loan provisions and the pension fund deficit widened. The bank’s capital position has improved slightly, but there doesn’t seem to be much of a case for increasing the dividend. There have been suggestions that Lloyds is on the look-out for more margin-rich opportunities, such as credit cards, with MBNA cited as a potential target. But banks can get themselves into all sorts of trouble if they attempt to cross sell to existing customers.

Horta-Osorio sidestepped questions about his personal life in his briefings on the third quarter. But shareholders are entitled to know in full detail how the bills for his break in Singapore were settled and whether the disclosure of a liaison will impact on his own future at the bank. Certainly, if he has any hopes of moving across to HSBC, either as chairman or chief executive, they have been scuppered.

The next challenge for the Portuguese boss at Lloyds will be to get the share price back to a level where the government can offload its remaining stake to institutional investors.

Broker Hargreaves Lansdown still wants to see a return to popular capitalism with a ‘Tell Sid’ offer to the public and is setting up a petition. But in the current era of low interest rates and money printing, that simply isn’t going to happen.

Hitting the buffers