Alistair Darling admitted government failings over the credit crunch yesterday while attacking the banks for not holding their executives to account.

The Chancellor of the Exchequer cast aside Gordon Brown’s caution over accepting mistakes in economic management when he appeared before the House of Lords Economic Affairs Committee.

During a lengthy session he hinted strongly at measures to help savers in the Budget in March or April.

He also foreshadowed an important new policy document coming around the time of the Budget dealing with Lord Turner of Ecchinswell’s review of regulation, international regulatory changes, and measures to strengthen the supervision of banks and corporate governance, including the role of boards and nonexecutive directors.

He also admitted that other banks might still need assistance and that a further “one or two institutions” could need rescuing along the lines of the failed Bradford & Bingley.

He said that he had not ruled out the creation of a “bad bank” to take on the banks’ “toxic assets” that they had been left with as a result of the collapse of the sub-prime mortgage market in the US.

“We have got a way to go in terms of getting the banks through this,” he said.

But peers were also given a series of “mea culpa” statements that interviewers have sought without success from Mr Brown.

“I am not going to sit here and tell you there weren’t lessons to be learnt on the part of us and other governments,” he said.

“With the benefit of hindsight, lots of things might have been different. We need to tighten up our own supervisory and regulatory regime.”

There needed to be a complete change of culture in the boardroom of financial institutions in the future.

Mr Darling told peers that financial institutions would have to stop off-loading risk in the way they had and failing to ask enough questions about the liabilities they were taking on.

“Both executives and nonexecutives are not just there for the ride, to charge their fees, they are there to ask serious questions and to hold the executives to account.

“And indeed if some of these institutions had asked more questions about what was going on perhaps we might not have got into this difficulty.”

Mr Darling suggested that the Financial Services Authority should have done more to identify other banks in similar difficulties to Northern Rock.

Mr Darling said that, without globalisation, the UK’s financial services industry would never have done as well as it did. But he added: “The other side of that is that we have never seen the risks that come from globalisation, where a problem in one part of the world can within weeks affect us here and other countries as well.”

With the Bank of England’s Monetary Policy Committee meeting today to discuss a further 0.5 per cent cut in interest rates, Mr Darling accepted that low rates had a downside for savers. “That is something I need to look at and something we will return to at the time of the Budget,” he said.

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