The reception was hosted by Sir Win Bischoff, chairman of the New York-based Citigroup, who had just presided over a two-day board meeting which turned out to be one of the gloomiest in the long history of the American bank, then ranked as the seventh biggest in the world. Bankshares that day had collapsed, with Citigroup’s own shares down 40 per cent in a single session and no financial institution, including Lloyds, had escaped the market mayhem. What had been intended as a social evening for his Citigroup board to meet some of the leading figures in Britain’s banking and financial communities had been overwhelmed by the events of the past twenty-four hours.

Bischoff was anxiously glancing at his watch when Blank finally appeared. A few minutes earlier he had checked with the organiser to see if everyone was present so they could cut off the interminable drinks session and go next door to dinner. ‘All, except for one person,’ she answered. ‘We’re still waiting for Sir Victor Blank.’ ‘We’ll give him five more minutes,’ Bischoff decided. ‘The Prime Minister wants to disappear but he wants to talk to him first.’

At that moment the Prime Minister, Gordon Brown, was standing a few feet away, deep in conversation with Bob Rubin, a former co-chairman of Goldman Sachs and Treasury Secretary under Bill Clinton who now served on the Citigroup board. Brown knew him well from his days as Chancellor of the Exchequer, and the two of them were animatedly debating the urgent actions their respective governments should be taking to head off financial Armageddon.

The Citibank event had been in Brown’s diary for months but he had cancelled the dinner and had come along to the cocktail party to hear what the bankers had to say – and to lend an air of reassurance that the government was staying calm. The atmosphere in the room was anything but calm. Words such as ‘scary’, ‘terrifying’ and ‘meltdown’ could be heard above the hubbub and the word ‘Lehman’ was on everyone’s lips. The events over the weekend were unprecedented in financial history and no one had any illusions about the fall-out, which was going to affect all of them profoundly.

Blank, not a man to panic easily, was as concerned as any of them. He had woken up that morning to the news that Lehman was filing for bankruptcy, the biggest banking failure ever and America’s largest bankruptcy. And that was not all: the mighty Merrill Lynch, the legendary
‘Thundering Herd’ and the largest brokerage house on earth, had suffered such massive losses on its mortgage portfolio that it had to be bailed out by Bank of America before the markets opened. At close of business on Friday there had been four major investment banks on Wall Street: Merrill’s, Lehman, Morgan Stanley and Goldman Sachs. By Monday there were two: Morgan Stanley and Goldmans – and even they looked perilously close to the brink too.

Just as seriously, the global insurance giant AIG (American International Group, Inc.) was in deep trouble, desperately trying to scrape together an emergency injection of $50 billion to keep it afloat after its shares fell by 72 per cent in one day. Its collapse, which seemed imminent, threatened the entire world insurance system as well as the banks, whose loans it insured.

Blank had spent the day talking to his executives and board, trying to get a handle on the impact on Lloyds of these momentous, unimaginable events. Lloyds, like every bank, did business with Lehman and he knew there would be a write-off, possibly running into the hundreds of millions. Until twenty-four hours before, Lehman had also been Lloyds’s lead stockbroker (Merrill was another one) and would have to be replaced at a time when it was needed the most.

As he arrived at the Citigroup reception, Blank was still trying to absorb the fact that the brash, irrepressible Lehman, which was founded in 1850 and had weathered the American Civil War, the Great Depression, two world wars and countless financial crises, was no more, its doors closed forever. Earlier in the day he had watched the TV coverage of disconsolate Lehman employees, among the highest earners in the City just a week before, carrying all that remained of their glittering careers in cardboard boxes out onto the street in Canary Wharf. That stark, unforgettable scene, more than any other, symbolised better than anything the end of the longest and biggest banking boom in history – and presaged the biggest crash which was now under way.

The Lloyds chairman made straight for Bischoff who tactfully steered Rubin away to leave Brown alone with Blank, out of earshot of the rest of the room. The Prime Minister didn’t waste time on pleasantries and went straight to the matter on hand. ‘I haven’t forgotten that conversation we had on the plane about Halifax Bank of Scotland,’ he began, oblivious to the quizzical looks cast in their direction. ‘We have been thinking quite hard about it – and we’ll do everything we can to help.’

This was momentous news, which Blank had been waiting to hear since he and the Prime Minister talked on a plane coming back from Israel six weeks before. But he hadn’t expected to get it at a cocktail party. For two years Lloyds and HBOS, Britain’s fifth and fourth biggest banks respectively, had been trying to find ways to merge but had never been able to get past the competition issues involved. In July, with HBOS in serious trouble, Blank had suggested to Brown that the government help clear the way for the merger on the grounds that, unless HBOS was rescued by Lloyds, it would either go bust or have to be nationalised, both equally
unpalatable for the Prime Minister. Now he listened, half stunned, as Brown finally gave him his decision.

‘We recognise your argument that you could not go through the competitions process, particularly if there was a full review,’ the Prime Minister said. ‘Halifax Bank of Scotland could not survive it, so if you still want to do it, you should get on with it quickly.’ He had, he said, scheduled a meeting the next morning with the new Chancellor, Alistair Darling, and
Mervyn King, Governor of the Bank of England, and he would start the process immediately. After once more urging Blank to move fast and keep Downing Street informed, the Prime Minister turned away and, saying his goodbyes, left the room. He was expecting a long evening back at the office.

It took the normally quick-witted Blank a moment to take in the significance of what he had just heard. In effect, he had been given the green light for Lloyds TSB to proceed with the acquisition of HBOS, which at that moment seemed to be heading the same way as Northern Rock, the high-flying mortgage bank which had collapsed the previous year after the first bank run in Britain for more than a century. That day alone the HBOS share price had fallen by 18 per cent, deposits were flowing out at a terrifying rate and the view in the Lloyds boardroom, shared by some of those in Spencer House, was that without government help, or a takeover from a stronger bank, it might not survive the week.
With 15 million investors, 5 million mortgage-holders, 2 million shareholders and assets in excess of the annual UK GDP, its collapse could bring down the whole British banking system, turning the developing recession into the deepest depression since the 1930s.
The Prime Minister was aware that, behind the scenes, Lloyds and HBOS had been in merger discussions for months, but he didn’t know the details. In fact, they were a long way down the road, and two months earlier the two banks had informally agreed on a basic structure whereby
Lloyds, marginally the smaller of the two but with a stronger balance sheet, would take over HBOS.

It would be an all-paper deal, a swap of Lloyds’s shares for HBOS’s, designed to protect every pound in precious capital the two banks could muster between them. Blank would be chairman of the new group and his American-born chief executive, Eric Daniels, would retain executive control. In a single bound, Lloyds, long seen as the staidest and most old-fashioned of all the high street banks, would vault to first place among domestic British banks, a position it had not enjoyed for a decade, the leader in all the major banking retail markets.

To the 65-year-old Blank, in his third year as non-executive chairman, HBOS was ‘the big prize’, the acquisition which, from the moment he arrived at Lloyds in 2006, he and the board had believed was the best solution to Lloyds’s strategic problems. Both HBOS and Lloyds, he had long concluded, were ‘marooned’, stuck as two mid-sized financial institutions focusing on a mature UK banking market which had barely grown in five years. A decade of trying to expand through cross-border mergers in Europe had taken Lloyds nowhere and for some time Blank and
Daniels had been focused on a merger with HBOS as their best way to break out of their strategic straitjacket. The financial crisis, and HBOS’s looming problems, gave them their window, the one brief moment when the competition rules could be relaxed long enough to let them through, but they had to move fast before it closed again. HBOS, after a period of wild and overaggressive expansion, needed rescue and Lloyds was the only bank around that could bail it out.

Watching the Prime Minister’s back recede through the door, Blank caught the eye of his chief executive, who had been observing his interaction with Brown from across the room, and he gestured for him to follow him outside. Daniels was an obsessive smoker and was delighted
to be in the open air where they stood on the steps directly underneath Rupert Murdoch’s London apartment and facing (Lord) Jacob Rothschild’s headquarters (also at the party).

‘Eric, you’re not going to believe this,’ Blank began as Daniels lit up. He then related the conversation he had just had and its implications. ‘It’s as firm an assurance as he can give,’ concluded Blank. While Blank went back into the dinner, Daniels wheeled into action,
calling his opposite number at HBOS, Andy Hornby, to pass on the news and ask him to assemble his executive team for a meeting first thing in the morning.

Later in the evening Blank got hold of the HBOS chairman, (Lord) Dennis Stevenson, to tell him: ‘Dennis, we’ve got the go-ahead from Gordon Brown on the competition issue. But we need to move fast.’ Stevenson, contemplating the collapse of his bank and an inglorious end to his career, needed no urging.

The biggest banking merger in British history was under way.

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Sir David’s sons Miles, George and Wilfred Frost paid a special tribute to their father by taking part in the match for the first time. They played alongside an stellar line up of world cricket legends including Shane Warne, Desmond Haynes, Sachin Tendulkar, Kevin Pietersen, Brian Lara, Wasim Akram, Muttiah Muralitharan, Gordon Greenidge and Andrew Flintoff.

Lady Carina Frost also attended the charity event along with well-known guests including Sir Michael Parkinson CBE who served as an umpire during the match; Piers Morgan and wife Celia, Lord Archer, Carol Vorderman, Claire Sweeney and the recently-retired royal obstetrician gynaecologist, Sir Marcus Setchell.

The teams were captained by Mark Nicholas and Shane Warne.

The money raised from this year’s event will be donated to the newly-created Sir David Frost Research Fund providing vital support for doctors’ training grants and research to improve the health of women and babies.

Sir David’s efforts were also applauded by Sir Victor Blank, who said:

“David was a superstar but he was also a super family man, a super human being and a wonderful friend. He was also a pretty decent wicket keeper!

“It was David who got me involved with Wellbeing for Women many years ago. His pitch was to me that he and his wife had managed to have three children easily and safely and he wanted to make sure that no other family was denied that pleasure.

“He helped raise money for Wellbeing for over 30 years and it is wonderful to see so many cricket legends and supporters of the charity celebrating Sir David.”

Liz Campbell, Director of Wellbeing of Women added:

“Sir David was extraordinarily generous with the time and energy he committed to Wellbeing of Women. He helped raise significant money for medical research and training grants and countless women and their families owe a great deal to him. Even if they never realise. Today in particular, his presence is sorely missed.”

Social immobility is not a new problem, but it is getting worse, failure to tackle it is becoming an increasing issue in our society. How do we give young people free and open opportunity to compete with those who benefit from the ‘right’ connections and the ‘right’ introductions?

Two-thirds of children who are in poverty live in a house where at least one parent is in work. The quality of our schools still varies hugely: 29 per cent of schools serving deprived areas in the North East are rated as good/outstanding compared to 77 per cent in London. Young people from the 20 per cent most advantaged areas of the UK are nearly seven times more likely to go to the most selective universities as from the 40 per cent most disadvantaged.

There are practical measures and remedies which can be taken by business and the educational establishment to reduce social immobility – a problem which is being tackled on a daily basis by charitable bodies concerned with the next generation’s wellbeing.

So what can big business do? Business should look beyond the obvious candidates, under the surface there are very bright people who need to be uncovered and encouraged. They need to improve their search for talent among those from less privileged backgrounds. For a start they could provide a greater provision of work experience. Surely every big business can afford to provide more apprenticeships? They need to widen their scope of their intake.

Of paramount importance is ensuring all internships are paid, and making sure that the pool of talent for internships is broadened and not limited to the friends and family of those already in the boardroom. This means accepting interns from a broader range of schools and universities, and not just always opting for those from private education and the Russell Group or Oxbridge. Businesses must place the merit of educational achievement in the context of the school or university they were achieved in.

We know from the Social Mobility and Child Poverty Commission’s last state of the nation report that many big businesses are failing to grasp the issue. You can’t overstate how frustrating that is when it is estimated that breaking the link between background and achievement could add as much as four per cent to GDP as well as improving life chances.

Schools also need to take responsibility themselves and receive outreach from businesses positively. Too often the Social Mobility Foundation (SMF), which I chair, encounters teachers who are negative about the free-of-charge, potentially life-changing opportunities for the pupils they teach. This negativity is shameful and inexcusable. The impact of that negativity for their pupils is, quite simply, that their potential and lifetime opportunities are limited by it.

Charities also have an important role to play, particularly when it comes to holding big business and the educational establishment to account. The SMF, aims to tackle some of these problems by helping high-achieving young people from low-income backgrounds enter top universities and to fairly compete for entry into the professions and big business. We are playing our part by providing the programmes aimed at helping young people realise their educational and career aspirations. The majority of the young people we take on are eligible for Free School Meals, which means they come from families with a household income of less than £16,190. They’ve done well at school, and are expected to do well at A-Level, but for the jobs they’re interested in – such as in politics, journalism, medicine and banking – this will not be enough to get them there.

Personal circumstances come into play and can prevent them from realising their true potential.

Take a recent example of a very bright young lad from Hackney who was on our City Talent Initiative scheme. The programme provided him with a mentor from JP Morgan as well as a placement with the city firm every three years subject to performance. You’d struggle to find a more perspicacious and hard working individual. But sadly, all of this could have been for nothing as he was unable to pay for his travel to work. We of course made sure his expenses were covered, but it is a stark example of how someone’s personal circumstances can limit the opportunities their intelligence and ability would otherwise allow them to pursue.

Most alarmingly, sometimes social mobility can even be hindered by old prejudices, which most of us would have thought had been consigned to history. Take for example the recent case we were faced with of a young female student at a state school on free meals, who was predicted two As and a B at A-level and who wanted to pursue a career in medicine. She went to see her careers master and told him she had always wanted to be doctor. His response was “no dear, the best you can expect is to be a nurse”.

When those from disadvantaged backgrounds already face so many obstacles, they don’t need the added encumbrance of stuffy and archaic attitudes to set them back further. Cases such as these underline the fact that there is still a lot more work to be done. When so much is at stake for the future of the next generation and the country’s economic wellbeing, it is high time government, big business and the education system did more to help to help under privileged and the unrecognised to fulfil their potential.

This is not just altruism, it’s also sound economics.

Sir Victor Blank is chair of the Social Mobility Foundation

This story was first published on The Independent