The First Minister said events of recent days have shaken the Scottish financial sector to its core, but this situation could have been avoided.
"The Financial Services Authority has shut the door after the bank has bolted by belatedly putting a stop to the naked short-selling of stocks that was at the heart of the plunge in HBOS's share price," he said.
"The short-selling which helped precipitate the take over talks was not something which emerged out of thin air last Wednesday morning. It is a well-known practice which had already been used quite deliberately against HBOS earlier this summer.
"At that time, the company's share price steadied after it became clear it was being targeted by malicious traders.
"The FSA could, and should, have acted then to make sure that an august Scottish institution - or any other bank - the custodian of around a fifth of UK mortgages could not be destabilised at the whimsy of the speculators. These people thrive in the circumstances of global instability that the markets experiences last week.
"Finance market regulators in other countries have been ahead of the game in acting to put a block on short-selling. It is deeply regrettable that their UK counterparts did not act sooner and stand behind institutions to which they had given a clean bill of health.
"HBOS's reputation and its independence as a Scottish-based bank have been sacrificed for no good reason. Of course banks with big mortgage books are vulnerable when asset values are falling. But in the last twenty five years major banks with far worse capital ratios and much much less profitability have survived to prosper.
"When the FSA gave HBOS a clean bill of health on the Wednesday morning that should have been accompanied by the financial authorities standing behind the liquidity of the Bank. HBOS was, and is, no Northern Rock.
"It is worth quoting the FSA directly, lest there be any doubt about the matter, or rewriting of history. HBOS, the regulators said, was "a well-capitalised bank that continues to fund its business in a satisfactory way".
"In the wake of that Wednesday's extraordinary movements in share price, during which the Lloyds TSB merger bid was first rumoured and then confirmed, the FSA continued to make clear its confidence in HBOS, issuing an identical endorsement on Thursday.
"I believe that had the FSA only acted sooner, we would not today be talking about the future of many thousands of Scottish jobs and all the knock-on effects that has for the wider economy. The Bank of Scotland would have survived to prosper as it survived mercantalism, monetarism, two world wars and the great depression.
"The situation we now find ourselves in demands that we quickly turn all our energies towards making sure that Scottish jobs and the Scottish national interest are protected.
"There are important lessons to be learnt, but first lets do all we can to save jobs and decision making functions at the Bank of Scotland.”
To this end it is believed that the SNP are trying to gather together Scottish financial heavyweights and come up with a rescue plan as an alternative to the Lloyds TSB takeover.
