Officials face Northern Rock grilling

Britain's financial watchdog is facing a grilling over its failure to head off the Northern Rock crisis.

Financial Services Authority (FSA) chief executive Hector Sants and chairman Sir Callum McCarthy are to be quizzed by the Treasury Select Committee.

MPs will challenge them on how they allowed Northern Rock's situation to deteriorate to such an extent that the UK saw its first run on a bank in 150 years.

The crisis - sparked by turmoil in the international credit markets - was quelled only after Chancellor Alistair Darling stepped in to guarantee people's savings.

Those safeguards have now been extended to cover all new deposits.

The Treasury said the new agreement would give the ailing banking group breathing space as it continues to pursue "the full range of its strategic options".

Northern Rock will pay an "appropriate fee" for the extension of the Government guarantee to ensure that it does not receive a commercial advantage.

Northern, which is in discussions with possible bidders, said in a statement: "Accordingly, all retail savings - for both existing and new depositors - remain guaranteed, safe and secure."

The Treasury said the guarantee would be extended to all new retail deposits made after September 19, including those made from today.

It added: "These arrangements will cover all retail deposits including future interest payments, movements of funds between accounts and term deposits for the duration of their term."

The arrangements will be complemented by additional facilities through the Bank of England.

Northern said it expected the process relating to the review of its strategic options to be completed by February.

It added that discussions continued with selected parties after it revealed last month that it had received a number of approaches regarding "a variety of potential transactions".

© Independent Television News Limited 2007. All rights reserved.