Members of the Parliamentary Commission on Banking Standards were angered over a letter sent by Lord Stevenson of Coddenham to the Financial Services Authority (FSA), sent six months before its collapse, stating it was in robust health and “boringly boring”.

The panel said the letter was a travesty of the true position.

Months after the letter, HBOS collapsed and was rescued by Lloyds TSB with with help of a £20bn taxpayer subsidy.

The bank’s former chief executive Sir James Crosby also admitted he sold off two-thirds of his holdings in the lender in the two years before its collapse.

The Independent reports Crosby admitted that lending by bankers at HBOS was “incompetent” after a heated exchange with chairman of the commission, Andrew Tyrie.