The entire board of Northern Rock stood ready to tender its resignation if shareholders demanded it, the senior independent director of the troubled bank disclosed yesterday. Facing a hostile Commons Treasury Committee hearing, Sir Ian Gibson told MPs that in the week before the bank run that stripped Northern Rock of £2 billion in a few days, he had asked board members whether they were prepared to quit over the funding disaster.

In the aftermath of the bank run, shareholders advised him that it was too soon to consider which heads should roll. “They said: ‘You can worry about that later. What you can do now is direct the bank through this crisis,’ ” Sir Ian said.

His disclosures came after Michael Fallon, the Conservative MP, asked: “Does no one have any honour? Has no one offered to resign?” Andrew Love, the Labour MP, accused the board of consigning Northern Rock’s name to the “dustbin of history” and dragging the good name of British banking through the mud.

Matt Ridley, the Northern Rock chairman, said: “I’ve made it clear to our senior independent director that my resignation is available to him as soon as he thinks that it’s in the interests of the company, employees, customers and other stakeholders that I go.”

However, Adam Applegarth, the chief executive of the bank, refused to shoulder any blame for the strategy that made Northern Rock more reliant on wholesale borrowing than its rivals. When credit markets world-wide froze in early August, Northern Rock was unable to sell new mortgages, forcing it to seek an emergency loan from the Bank of England and precipitating the run on deposits. Although Northern Rock had $3 billion (£1.5 billion) in liquidity insurance, Mr Applegarth said that this was insufficient to meet the bank’s funding needs. So far the bank has borrowed £13 billion from the Bank of England.

“I feel great regret for the anxiety of retail customers,” he said. “It was a good business model that couldn’t cope with unforeseen events in the global markets. I don’t think we’re the only ones [to have had difficulties], evidenced by the borrowing from the ECB [European Central Bank].”

Mr Applegarth said that Northern Rock became aware of tightening credit markets in March and so slowed down its lending and began to sell higher-risk assets. He said that this year the bank’s growth would slow to 16 per cent to 17 per cent, down from 20 per cent to 22 per cent in previous years.

The chief executive admitted that the Financial Services Authority had told Northern Rock that its stress-testing was insufficient, but said that it was a “work in progress rather than a red flag”. Likewise, Sir Derek Wanless, head of the board’s risk committee and the former chief executive of National Westminster Bank, rejected a number of accusations levelled by John McFall, the Labour MP and committee chairman, that he should have been the “cautious voice” on the board. Mr McFall said: “You’re out of step with every other retail banking operation in this country and you’re unable to explain to us why.”

Instead, Mr Applegarth blamed the Bank of England for scuppering a takeover of Northern Rock by a “big retail bank”, thought to be Lloyds TSB. He said that if the central bank had been quicker to agree to transfer the Rock’s emergency loan to a buyer, a deal could have been secured. He said: “The run wouldn’t have taken place if we’d been able to announce an offer. The Bank [later] made explicit that the facility was transferable . . . Understandably, by then we were in the middle of a retail run, so it was difficult to find a safe haven.”

During the three-hour hearing, the committee repeatedly questioned how news of Northern Rock’s emergency borrowing had been leaked on the evening of September 13. Mr Applegarth said that at that stage the loan had not even been properly agreed. The leak blew Rock’s plans to widen the bandwidth on its internet accounts in time for an orderly Monday announcement. Instead, on Friday, September 14, customers flooded the bank with online withdrawl requests, causing Northern Rock’s computer system to crash, and queues formed outside its 76 branches for days.

Countdown

August 9 Northern Rock’s funding problems grow

August 10 Matt Ridley discusses problem with Adam Applegarth

August 13 Rock informs FSA; begins seeking cash elsewhere

August 16 Mr Ridley discusses loan with Bank of England; puts Rock up for sale

August 30 Board members asked if they will tender their resignations

September 10 Takeover talks fail

September 13 News of loan leaks

September 14 Run on bank begins

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