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Rival investment houses have criticised failed US bank Lehman Brothers, claiming its chief executive must have been in “denial” not to have seen the writing on the wall.

Neil Dwane, chief investment officer for Europe at RCM, said: “The financial crisis has been a theme of mine since way before Northern Rock. I do not understand what the non-executives at these companies have been doing. I am shocked at the lack of oversight they have had. Dick Fuld at Lehman’s has been in denial of what has been going on.”

He added regulators have been negligent, particularly in the UK where neither the FSA, the Bank of England nor the Treasury can see the whole picture, although bank management must shoulder the majority of the blame.

Mr Dwane said: “The world cannot exist without banks but they have been negligent. This is a fin de siécle moment.”

He also predicted more regulation that he claimed has started with the Danish outlawing of certain structured products.

He predicted credit default swaps will be outlawed entirely once current positions are wound down.

The outcome could be lower profitability for banks and no growth for the next 10 years in developed markets, he anticipated.

Opinion on how much investors can expect to recover from the bonds is divided. Moodys’ figures are the most optimistic with recovery rates of 90 per cent or more expected.

Other agencies are less certain. Creditsights says investors can expect to receive back between 60-80 per cent.

In a market update, F&C’s head of asset allocation Paul Niven said the group has been mindful of the risks being exacerbated by the deepening credit crisis, moving underweight in June.

Jason Hollands, head of corporate affairs at F&C, said: “We had very little exposure to Lehman equity but we did have Lehman bonds in our corporate bond funds.

“They are still trading, unlike the equity which is wiped out.”