Chancellor Alistair Darling today delivered strong criticism of both the City of London's top financial regulator, the Financial Services Authority (FSA) and the Bank of England (BoE), over their crisis-management of the Northern Rock affair.

Answering questions before the Treasury Select Committee today over the run on the bank, Mr Darling said the FSA needed to "look at its procedures" and the Bank of England needs to examine how it intervenes.

It also has emerged today that Northern Rock has now borrowed over £20 billion from the Bank of England, after withdrawing a further £4.65 billion in the last seven days.

Mr Darling said: “The Bank of England is very clear it too has lessons to learn. There are questions we have to ask ourselves about the interface between the BoE and the FSA.”

“I think there does need to be some clarification between what the BoE does and what the FSA does. Clearly there is some overlap between the two.”

He said: “Domestically, the FSA does need to look at its procedures, the BoE has said today it needs to look at how it intervenes."

Mr Darling added: “In hindsight it would have been much better if the FSA when looking at Northern Rock had asked what it’s fall back position is. Regulators need to be looking more at liquidity not just solvency.”

Northern Rock spread panic among its savers last month when it emerged that it had sought emergency funding from the Bank of England, sparking a run on the Newcastle-based mortgage lender with customers withdrawing an estimated £2 billion in a matter of days.

The Chancellor reiterated Bank of England Governor Mervyn King's view that the central bank should be able to act secretly if the situation requires it.

He said:“If central banks are to do their job there will be times when they have to do it without people knowing about it for the greater public interest.”

Mr Darling appeared confident that the billions of pounds Northern Rock has borrowed so far from the Bank of England will be repaid, and the best scenario for the future of the mortgage lender is to be acquired by another institution.

Northern Rock has admitted it is in talks with a number of potential bidders which include Sir Richard Branson's Virgin Money.

He backed the tripartite system made up of the Treasury, the FSA and the Bank of England, which governs the UK's financial stability, but conceded: "There are certainly lessons to be learned.”

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