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O'Neal 'told London that Merrill would escape'

Stan O'Neal, the Merrill Lynch boss set for the chop, sent an e-mail to his London staff reassuring them that the bank would escape the trouble in the sub-prime market.

The e-mail urged people to remain calm in an effort to reassure them that the bank had not been badly affected.

The reports in City AM confirm how badly the situation was read by Mr O'Neal who is reported to be negotiating a severance package from the bank.

He was still in his position last night but the announcement of his departure is expected soon.

But Mr O'Neil is not expected to leave quietly and is tipped to be negotiating a severance package worth $159 million.

Critics have been angered by the news that "rewards failure" and Frederick Rowe, president of a US pressure group Investors for Director Accountability disagreed with the large sum on offer.

"It's objectionable that someone who blows things that badly should get this amount of money," he said.