The Financial Services Authority (FSA) will be accused tomorrow of failing to supervise Northern Rock when MPs grill officials over the watchdog’s role in the crisis.

Michael Fallon, the Conservative MP and vice-chairman of the Commons Treasury Select Committee, told The Times yesterday that he intended to lay the blame on the FSA for the run on the Newcastle-based bank.

The committee, which last month tackled Mervyn King, the Governor of the Bank of England, over the Bank’s handling of the crisis, will question Sir Callum McCarthy, the FSA chairman, and Hector Sants, the chief executive, about Northern Rock’s rapid growth and “risky” business model.

Mr Fallon said: “We are not searching for someone to blame. There can’t really be any argument as to who the prime suspect is. The FSA was the bank’s supervisor; it is the reason why we ended up with the first run on a bank in 150 years.”

Andy Love, the Labour MP and committee member, said that Sir Callum and Mr Sants would be asked if the FSA had been properly “monitoring, supporting and advising” Northern Rock while it embarked on an aggressive expansion programme based on securitisation.

Northern Rock funded its loans largely through the wholesale money markets, rather than using existing deposits. It ran out of cash when inter-bank lending froze in the wake of the collapse of the sub-prime mortgage market in the United States.

Sources said last night that Northern Rock was about ten days away from agreeing a £10 billion loan from Citigroup to help to fund its continuing operations and reduce its dependency on Bank of England funds while it continues negotiations with potential suitors.

It is understood that JC Flowers, which is circling Northern Rock, has agreed provisional financing from JPMorgan and Credit Suisse. The sources said that Northern Rock and its advisers were also in talks about putting together another consortium of banks to lend to Northern Rock in the event of a takeover falling through.

Mr Love pointed to a “lack of transparency” in the money markets and said: “It was inherent in the system that [the liquidity crisis] was a possibility. The question that needs to be asked is: was [the FSA] concerned?” He said that Northern Rock was “putting so many eggs into one securitisation basket - what was the regulator saying about the use of that model?”

An FSA spokesman declined to comment on Northern Rock’s business model, but said: “We don’t object to securitisation per se. There are some benefits in terms of spreading risk, but it has to be done sensibly.”

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