Northern Rock chiefs blame media for crisis

THE chief executive and chairman of Northern Rock yesterday appeared to blame media coverage of their bank's dire finances for the extraordinary run on its accounts that nearly sank the company last month.

Adam Applegarth, Northern Rock's chief executive, told MPs that the revelation that his bank had been forced to seek emergency financial support from the Bank of England had helped cause the wave of panic withdrawals that may have seen as much as 7 billion pulled out of its accounts.

And Matt Ridley, the bank's chairman, said that without the media exposing Northern Rock's troubles, the run on the bank could have been averted.

The bank's troubles ultimately stem from a global shortage of credit. But its efforts to keep its plight a secret were shattered on the night of Thursday, 13 September when the BBC revealed that Northern Rock had asked the Bank of England for an emergency line of credit.

The following morning, queues started to form outside Northern Rock branches as savers rushed to withdraw money. The panic eventually forced the Treasury to issue an unprecedented public promise to underwrite all money deposited with the bank, a promise that could be worth more than 20 billion.

Mr Applegarth, testifying before MPs on the Treasury select committee yesterday, made clear he considered the BBC report to have contributed to his bank's near-demise. "It caused us immense difficulties," he said.

Dr Ridley said: "Had the leak not happened and we had made the announcement on Monday with full communications plans in place, there would have been some concern to our customers but we think it would have been less than in the way it came about."

The Northern Rock chief's suggestion that the withdrawals could have been averted appears to put them at odds with the man who saved them from collapse.

Mervyn King, the governor of the Bank of England, last month told MPs that the customers who queued to pull money out of the bank had been acting "rationally" because of its weak position and the limited legal protection their savings had.

During a stormy interrogation yesterday, it emerged that both Mr Applegarth and Dr Ridley have offered their resignations to the Northern Rock board, but had their offers turned down.

Yet members of the cross-party committee yesterday left no doubt that they believe that the positions of both men are still extremely fragile.

Michael Fallon, the senior Tory MP on the committee, turned his fire on Dr Ridley. He said: "You are the chairman of the bank that ran out of money, that caused the first bank run in this country for 150 years. You have had to borrow billions of public money from the Bank of England. You have damaged the good name of British banking. Why are you still clinging to office?"

Dr Ridley, a former journalist and scientific author, replied that he was working "night and day" to repair the damage done to Northern Rock.