Northern Rock's former board faces legal action

Northern Rock's new management may take legal action against the bank's former board following the lender's crisis last year.

Chief executive Ron Sandler, who was brought in to turn the near-collapsed bank around, told the Financial Times in an interview that the board is looking into legal action against the previous regime, including ex-chief executive Adam Applegarth.

Mr Sandler told the newspaper: "I am not looking back trying to apportion blame.

"Any correct board would look at the conduct of any previous board and seek to establish whether that previous board had discharged all of its duties.

"I have initiated an investigation and that is ongoing. As and when it produces its results, I will know more about whether or not there is the basis of any action."

Mr Sandler also said the bank would be expanding its debt recovery department, from about 170 people to about 440, to help people who were struggling financially.

Since the subprime crisis led to the effective closure of the money markets last year, Northern Rock was forced to go to the Bank of England for an emergency loan.

The crisis led to anxious customers queuing around the block to remove their savings, as fears grew that the bank had run out of money.

According to a report in the Daily Mail yesterday, Northern Rock had a secret plan in place to avoid a repeat of the September bank run.

Called Operation Rapid Plan, shutters would have been down on all branches within minutes if the bank had not found a private buyer or been nationalised last February.

All calls would have been directed to the company's head office in Newcastle and cheques would have been sent to customers within 14 days.