The FSA has pledged to tighten rules governing banks’ access to short-term liquidity as it faced renewed criticism from the prime minister and the chancellor for failing to raise the alarm about the crisis at Northern Rock. Financial Times

The Financial Services Authority said it intended to introduce tougher rules to prevent banks falling victim to a short-term liquidity squeeze, demanding that they prepare more fully for extreme market conditions.

The FSA has been criticised for not imposing tighter controls on Northern Rock, which was heavily dependent on raising funds from the money markets rather than retail depositors. That made the bank particularly vulnerable to turmoil in global markets.

Gordon Brown told a Downing Street press conference the bank had a 'fundamentally unsound business plan' vulnerable to the global credit squeeze; a problem the regulator failed to identify until too late.