Northern Rock chief faces grilling

By Steve Slater

LONDON (Reuters) - Northern Rock's bosses face their toughest grilling since the bank was engulfed in a funding crisis a month ago when MPs quiz them on Tuesday on their strategy and assessment of risk.

Northern Rock Chief Executive Adam Applegarth and Chairman Matt Ridley face a Treasury Committee panel that last month accused the Bank of England of being asleep at the wheel during the crisis. The panel is expected to take an even tougher line on the risk taken on by executives.

The Bank of England stepped in to offer Northern Rock emergency funding on September 14, sparking panic among customers and the first run on a major UK bank for over 140 years, which only ended when the government stepped in to guarantee savings.

Critics have rounded on the Bank of England, the Financial Services Authority, the Treasury and the bank's management for not foreseeing the crisis and their handling of it.

Applegarth, 45, was the architect of the Newcastle-based lender's strategy to rely on wholesale markets for three-quarters of its funding and lend aggressively in a booming housing market.

CEO since 2001, he was lauded when growth was strong, but the model was shown up as too reliant on money markets when liquidity seized up this summer and funds were not available. Applegarth said no one could have predicted the sudden change.

The Treasury panel, headed by Labour MP John McFall, will want answers on whether the bank was too aggressive.

Under Applegarth, the bank grabbed mortgage market share from its big name rivals, although it did not take on risky loans. He wanted to be one of the top three mortgage providers within five years, from fifth now, and was the biggest lender in the first half of this year, providing nearly one in five home loans.