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Last Updated: Friday, 19 October 2007, 13:53 GMT 14:53 UK
Northern Rock chairman steps down
Northern Rock Chairman Matt Ridley
Mr Ridley was grilled by a parliamentary committee this week
Northern Rock chairman Matt Ridley has stepped down over his role in the bank's near collapse last month.

Mr Ridley had offered to resign in September but was asked to remain in his post to testify before a parliamentary committee this week.

Northern Rock said that Bryan Sanderson would take over as chairman of the bank as soon as he has been approved by the Financial Services Authority.

Mr Sanderson is a former Chairman of BUPA and of Standard Chartered.

Mr Ridley told the Treasury Select Committee on Tuesday, that the bank had been hit by "wholly unexpected" events and he defended the way he and his colleagues had been running the bank.

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

He was accused of "damaging the good name of British banking" by the committee of MPs.

Flawed model

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

Most lenders raise more of their money from savers' deposits.

Adam Applegarth, Northern Rock chief executive
Adam Applegarth, the bank's chief executive, has also faced criticism

Northern Rock's business model proved vulnerable when the summer's turmoil on financial markets due to problems in the US sub prime mortgage market made banks more reluctant to lend to each other.

This forced Northern Rock to seek emergency funding from the Bank of England.

When this was made public thousands of savers queued to withdraw money totalling more than 2bn, which was 8% of deposits it held.

Northern Rock said the time was right to accept the resignation of Mr Ridley, who trained as a zoologist and worked as a journalist for the Economist before taking up his role at the Newcastle-based bank.

There was no word on the fate of Northern Rock's chief executive, Adam Applegarth, who also offered to resign over the crisis.

Northern Rock has until February to assess options for its future, including a sale.

It has received approaches from several groups, including a consortium led by Richard Branson's Virgin Group.

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