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Last Updated: Tuesday, 16 October 2007, 11:23 GMT 12:23 UK
Rock risks 'were not foreseeable'
Adam Applegarth, Northern Rock chief executive
Adam Applegarth blamed the BBC for the run on the bank
Top executives of the Northern Rock bank have denied doing anything wrong in the run-up to the bank's recent near-collapse.

The bank's chief executive, Adam Applegarth, told MPs that nothing could have been done to reduce the risks the bank was facing.

He also told the Treasury Select Committee that the BBC was partly to blame for last month's run on the bank.

He blamed it for revealing the Bank of England's emergency loan to the bank.

"What severely hammered us was the retail run," said Mr Applegarth.

He said the BBC's exclusive report on 13 September, that the bank would need to seek emergency funding from the Bank of England, had scared his customers.

"It caused us immense difficulties," he said.

I cannot possibly know whether anyone decided to take their money out of Northern Rock as a direct result of seeing my broadcasts
Robert Peston, BBC Business Editor

He said that the bank and the authorities had planned to announce the emergency loan the following Monday, which they hoped would have led to less panic.

In the course of the questioning, it was also revealed that all the bank's senior directors had offered to resign in the immediate aftermath of the run, but had been asked to stay on to sort out its problems.

Nothing wrong

Under questioning from the MPs, Mr Applegarth and other Northern Rock executives refused repeatedly to admit they had done anything wrong, or say how they might have behaved differently.

They explained that they had planned how to cope with certain possible problems, such as a 40% fall in house prices, but had not planned how to respond if the bank's ability to borrow in the financial markets dried up.

"What wasn't stress-tested was the event deemed implausible - of the global markets freezing up overnight," said Mr Applegarth.

"The rapid and long-lasting closure of the global markets was not stress-tested," he added.

He said the bank had in fact started in March to slow down its lending.

But asked if he could have taken any action to mitigate the fundamental risk of the Northern Rock's business model, he replied, "No."

Wholly unexpected

Four senior executives of the Northern Rock were questioned by members of the committee following the bank's recent near-collapse.

The Northern Rock business model was a good one
Matt Ridley, Northern Rock chairman

The bank's chairman, Matt Ridley, said it had been hit by "wholly unexpected" events and he defended the way he and his colleagues had been running the bank.

"The Northern Rock business model was a good one - [but] that proved unable to cope with an unexpected seizure of the money markets in August," he explained.

"We were subject to a completely unprecedented and unpredictable closure of the world credit markets," he added.

Mr Ridley defended the bank's policy of borrowing large sums of money on the financial markets to lend as mortgages to house buyers.

And he denied an earlier suggestion from the head of the Financial Services Authority that the bank was running an "extreme business model".

Most of the borrowing was long-term - "longer than the average life of mortgages on our books," said Mr Ridley.

But Mr Ridley said he would resign if other directors asked him to do so.

Assessing options

Northern Rock's bid last month for emergency funding resulted in a run on the bank, with thousands of savers queuing to withdraw money totalling more than 2bn - or 8% of the amount of deposits it held.

As a result of the subsequent images of panicking customers outside its branches, the Northern Rock brand is now widely seen as irredeemably damaged.

The bank, whose market value has plunged by more than 60% since the start of the crisis, is now assessing options including a sale, a break-up and closing to new business.

On Monday, it said it was continuing talks with a number of "potentially interested" suitors, but that discussions were at a very early stage.

Its statement came after a consortium led by Sir Richard Branson's Virgin Group put forward plans to take control of the bank.

Speaking to the BBC, Jayne-Anne Gadhia, chief executive of Virgin Money which is leading a consortium interested in buying the bank, described the Northern Rock brand as "dead".

Mr Ridley confirmed that the Northern Rock had now borrowed 13bn from the Bank of England, but declined to guess how much more it might need.

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