Sir Tom McKillop, former chairman of the Royal Bank of Scotland, yesterday admitted that its purchase of Dutch bank ABN Amro in late 2007 was a "bad mistake" but denied that the board was cowed by chief executive Sir Fred Goodwin.

McKillop maintained that company directors and shareholders had several opportunities to express reservations about the takeover, which shrank Royal Bank's capital cushion just as the credit crunch hit.

He was giving evidence to MPs in a session with strong lobbying" from other investors that Goodwin be retained to oversee the integration of ABN Amro.

"Likewise there were institutions that wished me to stay."

Goodwin said his shares in Royal Bank had fallen in value by £5m as he denied that a short-term bonus culture at the bank had led to its downfall.

Hornby added: "I have invested every single penny of my bonus in HBOS and I have lost considerably more money over the two years I have been chief executive than I have earned."

He said that his £60,000-a-month consultancy role with Lloyds will last three months. He added: "If Lloyds TSB asked me to carry on I will do it and do it for free."

The HBOS pair blamed their bank's problems on the speed that wholesale markets, where the bank sought funding to make mortgages and other loans, had seized up.

Hornby said: "The balance sheet growth that had taken place since 2001 meant we were overexposed to wholesale funding. Clearly, if we had seen that those wholesale markets were going to close entirely, we would have done even more to change that dependence."

Stevenson also acknowledged HBOS had too much money in commercial property and housebuilding companies.

HBOS's risk management was queried after the committee received a memo from Paul Moore, former head of group regulatory risk at HBOS, who criticised an "over-eager" sales culture at the company.

Stevenson said: "There was a direct line from the head of risk to the board. There has hardly been a board meeting without a substantial chunk of discussion on risk."

But he added: "I do think there is a real issue about how stress testing is carried out and risk management takes place."

All four were questioned by MPs about their lack of banking qualifications. They maintained they understood the assets bank staff were dealing in, although McKillop acknowledged he did not understand them in their "full complexity".

Stevenson added that it was hard to recruit non-executive directors from the sector: "It is really difficult to get people with bankers' experience on board."

The bankers also shed some light on the speed with which the government's banking bailout, conducted by the Financial Services Authority, Treasury and Bank of England, was carried out in October.

Stevenson said he had two meetings with officials before the capital injection plans were confirmed.

Goodwin added that there was no formal due diligence on the government's recapitalisation of Royal.

"In the ordinary exercise of a team going in and doing due diligence, there was not the time."Goodwin and Lord Dennis Stevenson and Andy Hornby, formerly of HBOS, that saw all four apologise for their role in their companies' problems.

McKillop said: "In retrospect, we bought ABN Amro at the top of the market so anything we paid was an error. I am sorry we bought ABN Amro."

He added: "I would submit that the bulk of what we paid for ABN Amro will be written off as goodwill, and we paid about £10bn."

Under questioning from Treasury committee chairman John McFall he denied that the board failed to stand up to Goodwin over the deal.

"The premise we allowed Sir Fred to proceed implies this was driven by Sir Fred. This was not the case."

He said there had been 18 board meetings about the purchase, but acknowledged that directors had "a spectrum of opinion" about which part of ABN Amro to buy when Royal led the £50bn bid consortium.

"At every stage the board was unanimous in the steps we took. It is wrong to characterise it as a proposition driven by Sir Fred that the board was unable to stop."

McKillop maintained that the board had not been "unconcerned" about how to fund ABN Amro's balance sheet but had been hit by the gumming up of money markets.

"We had a plan when we acquired ABN Amro. Then the world changed. We were unable to implement that plan."

He acknowledged that in retrospect the deal was a "bad mistake".

But he added: "ABN Amro at the time, it didn't look like that. At the time we bid for the bank there was widespread support for it."

He pointed to a 94.5% shareholder vote for the deal in August 2007.

McKillop said due diligence investigations into ABN Amro's books had taken place in May 2007 and that Royal Bank had a "series of meetings" with ABN Amro staff before the takeover was confirmed in October of that year to ensure nothing had changed.

"It was very reassuring," he said.

All four banking executives apologised for their role in their banks' problems during the three-hour session.

Royal Bank needed £20bn of government money and is now 70% state owned. HBOS has been taken over by Lloyds TSB to create 43% government-owned Lloyds Banking Group.

But there was a difference in tone between the two companies.

HBOS's Hornby, who noted that many of the strategic decisions were made under predecessor Sir James Crosby, said: "I do not feel I am particularly personally culpable." But Goodwin, formerly of Royal Bank, acknowledged: "I fully accept my responsibility in matters."

But he denied any impropriety: "I think on reflecting on everything that happened there is cause to question some of the judgments that were made.

"I am not aware of a basis for questioning my integrity as a result of it all."

He added: "It's too simple just to blame it all on me".

McKillop acknowledged comments from Legal & General last month that it had sought Sir Fred Goodwin's and his own removal as long ago as May last year.

But he said there was "very

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