The Chancellor turned up the heat yesterday on the board of Northern Rock under Bryan Sanderson, its new chairman, to secure an early resolution to the bank’s plight, making clear that the Government could not guarantee its finances indefinitely.

Alistair Darling’s move to step up pressure on Northern Rock’s management, throwing the onus back on to its board to seek a viable solution for its future, came as it emerged that the beleaguered lender tapped the Bank of England for another £4.7 billion in emergency lending over the past week. That took its total borrowing from the Bank so far to £20.6 billion.

The Chancellor also took a sideswipe at the Financial Services Authority (FSA) over its role in the crisis at Northern Rock that led to the first run on a British bank in 140 years. While defending Britain’s system of financial regulation, Mr Darling questioned whether the FSA could have done more to prevent the Northern Rock crisis through tougher scrutiny of the bank, which he accused several times of pursuing an aggressive strategy.

“In hindsight, it would have been much better if the FSA, when looking at Northern Rock, had said: ‘Well, hold on, what exactly is your fall-back position’,” he told the Commons Treasury Committee. “I think the FSA needs more visibility of the consequences of an institution like Northern Rock on the wider system.”

With no lasting solution for Northern Rock yet in sight, Mr Darling indicated there was a limit to how long the Treasury was prepared to keep its guarantee, and the Bank of England’s financial lifeline in place.

“They have got a breathing space if you like, and they need to consider what is the best course of action. I have asked Northern Rock to come back to us with proposals by the beginning of February. I’m willing to review it at that time,” he said.

“I want to be as helpful as possible but the bank needs to play its part, too. I’m confident that the new chairman will put a degree of vigour into sorting out the problems.”

Under intense questioning over the role of the financial authorities, Mr Darling defended the controversial “tripartite” regime whereby policing of institutions is split between the Bank of England, FSA and Treasury and rejected calls for a Bank-FSA merger. “The structure we have is right. I would take a great deal to be persuaded we should merge these two,” he said.

However, he admitted that “there are certainly lessons to be learnt.”

“The FSA needs to look at its procedures, the Bank has said today that it needs to look at how it intervenes,” he said. “There are questions we should ask about the interface between the Bank and the FSA — clearly there is some overlap between the two.”

The Chancellor also signalled support for tougher rules on financial transparency following the global credit squeeze. There needed to be “better regulation to stop banks hiding things off balance sheet”, he said.

He acknowledged the Bank of England’s own acceptance this week that it, too, had lessons to learn,. But Mr Darling threw his support behind Mervyn King, the Bank’s Governor, defending him over his refusal to pump billions into interbank loan markets, in a move some claimed would have spared Northern Rock from its fate. Mr King disputed those claims and yesterday the Chancellor said clearly: “I back the Governor.”

Flowers picks

Paul Myners, the former M&S chairman, will become Northern Rock chairman if the US private equity firm J.C. Flowers wins a bid battle for the bank. J.C. Flowers has lined up five banking executives, including Northern Rock’s former finance director, to work with Mr Myners, a member of the Court of the Bank of England, on the takeover attempt. Richard Pym, former chief executive of Alliance & Leicester, will act as temporary chief executive.

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