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According to one significant banking sector figure, the blame lies with “weak management controls” at the bank.

The insider, who asked not to be named, said: “It was interesting to see Rod Kent, chairman of Bradford & Bingley, say that management was not good enough. He has been chairman for five years so it is interesting how he can blame someone else. He should be straight out the door as soon as it can find a replacement.”

Justin Urquhart Stewart, marketing director and co-founder of Seven Investment Management, claimed he had “never seen such a level of incompetence over a rights issue”. He said: “It reflects badly on the corporation and the City and it smacks of rank amateurism. It is unacceptable at a sensitive time for the banking sector.”

Alex Potter, analyst for Collins Stewart, agreed B&B had demonstrated “lack of controls” in its “internal reporting” at senior management level. He said: “It is clear to the rest of the industry new arrears were going up. The information it had, which was not enough anyway, was not being taken enough account of.”

Bradford & Bingley declined to comment on the issue.

Earlier this week, Bradford & Bingley saw its share prices plummet after it reported being £8m in the red, pre-tax, between January and April 2008, compared with an £107m profit for the same period in 2007.

In response to this, the bank has been forced to sell a 23 per cent stake to US investment bank Texas Pacific Global for about £180m and amend its rights issue from 82p – about half its 158p value – a share to 55p, with the aim of raising £258m.

Meanwhile, the bank has admitted it has struggled to meet the cost of mortgage fraud, compared with larger lenders, which has contributed to nearly half of its soaring credit impairment costs.

It lost £15m to alleged fraud between January and April and blamed a “deteriorating” housing market for the dramatic increase in arrears, which make up the remainder of the credit impairment figures, contributing to dramatic losses in the last quarter.

In a statement following the new rights issue on Monday, the society said: “Included in the year-to-date credit impairment figures is a provision of £15m relating to a small number of organised mortgage frauds. Insurance re¬coveries may be available against these losses but this has not been taken into account.”

Nickie Aiken, communications manager for Bradford & Bingley, said these figures, while “nothing unusual”, were problematic “because we are so much smaller than the other banks” and “it shows up more”.

She added: “A small number of organised frauds were found. While there was nothing unusual in the number we need to give the City a bit more of a steal on it.”

Meanwhile, mortgage fraud investigator Simon Chandler has claimed that the credit crunch was set to create a “shift towards individual borrowers, desperate to get remortgage finance by exaggerating their incomes”.

Bradford & Bingley reported an increase in three-month arrears on self-certified mortgages from 1433 in December 2007 compared with almost 2000 at the end of April.