Northern Rock Executives Questioned Over Strategy

Associated Press

Top executives from troubled mortgage lender Northern Rock face a grilling on Tuesday from a parliamentary committee seeking answers about how the bank was caught in a funding crisis.

Chief Executive Adam Applegarth and his team of senior officials were to face questions from the Treasury Select Committee about why Northern Rock's business model was unable to cope during the summer's money market turmoil.

Thousands of customers last month hurried to withdraw deposits from Northern Rock - currently in talks with a number of potential suitors - after it asked the Bank of England for an emergency loan and issued a profits warning.

Officials from the Bank of England and the Financial Services Authority have already been given a rough ride by the committee over the first run on a British bank for nearly a century.

Northern Rock relied on the wholesale money markets for 75 percent of its funding, but following the collapse of the U.S. sub-prime mortgage market the mortgage lender was unable to find credit as banks grew reluctant to provide loans.

Faced with a potential meltdown, Northern Rock applied to the Bank of England to act as a lender of last resort.

Critics have since rounded on the Bank of England, the Financial Services Authority, the Treasury and Northern Rock's management for not foreseeing the crisis and for their subsequent handling of the situation.