In an interview with the BBC Sants said he had advised this but was ignored by Mervyn King, the Bank’s governor, because it is claimed the £30bn required was too high a price.
Sants told the BBC: “I think things would have been different if the Government and Bank [of England] had taken my recommendation that they should provide liquidity support to Lloyds to purchase Northern Rock.
"I think that would have made a difference, it would have avoided the queues and it would have changed the general climate in relation to the old building society sector that had moved into the banking sector.
“So at that early stage if we had avoided the Northern Rock problem, which we could have done through that action, then I think the tone and people's view of the UK banking sector would have been different."
Sants also warned in the BBC interview that after the FSA is dismantled and the new regulatory structure put in place, the governor of the Bank of England will have too much concentrated power.
He said: "We could be concerned that the operational task given to the governor as an individual, of course that will be a new governor by the time the reforms come into place, is just too great," he said. "I'm comfortable with the powers given to the institution, but I would have a greater spread with how those powers are divided up."
King is due to hand over the top Ban of England job next year while Sants will step down from the FSA at the end of June after five years.
