Germany criticises BoE over Northern Rock

BERLIN (Reuters) - The Bank of England made a mistake last year in not pumping enough extra funding into money markets at the height of the mortgage crisis, German Finance Minister Peer Steinbrueck said on Friday.

In an apparent reference to a run by depositors on mortgage lender Northern Rock (NRKx.L) last year, Steinbrueck praised the U.S. and euro zone central banks' approach to helping commercial banks through the credit squeeze.

"The policy of the Fed and the ECB to supply the market with liquidity was right. A bank that didn't do this in Great Britain led to people standing in long queues outside (their bank)," he told the Bundestag lower house of parliament.

"Just imagine if we'd had these kind of scenes in Germany that harked back to the 1920s," Steinbrueck added. Germany was rocked by severe hyperinflation in 1922-1923.

Open criticism of foreign central banks by senior government officials has been rare during the financial crisis.

The Bank of England says its money market injections during the crisis have been on a par with the ECB's. It has just announced plans to allow banks to swap at least 50 billion pounds of tough-to-trade mortgage assets for government-backed debt in an effort to get banks lending to each other again.

The Northern Rock incident was the first run on a major bank in over a century. The government took the bank into temporary public ownership in February.

Steinbrueck also said on Friday the German state's stake in stricken lender IKB (IKBG.DE), an early victim of the subprime crisis, should not be sold at a bad price.

State-owned development bank KfW is the biggest stakeholder in IKB, which was rescued at a cost of billions of euros.

(Reporting by Dave Graham; Editing by Ruth Pitchford)