Bank fatcats who presided over Northern Rock collapse will NOT face court action

The former boss of Northern Rock will not be sued for negligence.

Adam Applegarth, the bank's former chief executive, will instead carry on being paid £63,000 a month in 'termination payments'.

The nationalised bank said it was dropping a potential legal claim against its former directors because there were 'insufficient grounds to proceed'.

Ron Sandler

Adam Applegarth (left) pictured before leaving Northern Rock and Ron Sandler, who found 'insufficient evidence' to take legal action against him

Mr Applegarth, 46, has insisted that the Treasury and the Bank of England were to blame for preventing a rescue bid for Northern Rock by Lloyds TSB. It instead had to be taken into public ownership

He can also look forward to a pension - currently worth £304,643 a year - built up during his 24 years at the bank.

Meanwhile, Northern Rock said yesterday that the number of repossessions by the bank has jumped to 4,201.

The Council of Mortgage Lenders says the total will hit 45,000 this year.

Ron Sandler, Government-appointed chairman of the nationalised bank, said: 'There are insufficient grounds to proceed with any legal action for negligence against the former directors.'

The new board brought in lawyers Freshfields and accountants KPMG to study the case against the former directors.

Sandler said: 'We have looked at this matter very carefully over a period of time and made our assessment of the conduct of the previous board.'

Northern Rock was brought to its knees through its massive use of wholesale markets to fund lending to homebuyers and through its aggressive pursuit of market share, which saw it offering loans up to 125 per cent of the value of homes.

Northern Rock

Paying back: Northern Rock was forced to turn to the Bank of England for emergency support last year

The bank had to turn to the Bank of England for emergency loans last August and was nationalised in February.

Sandler said earlier this year that he would see if there was a case for suing Applegarth and other directors for negligence.

He left Northern Rock last December with a £760,000 pay-off, and sparked anger when newspaper pictures showed him enjoying playing cricket while thousands of Northern Rock employees were being laid off. It had been suggested some of that might be clawed back through legal action.

Sandler said today's decision not to take legal action also covered the bank's former auditors PricewaterhouseCoopers.

They had faced heavy criticism for receiving £500,000 in audit fees in the bank's last full year as a public company but £700,000 in non-audit advice, which was specifically 'in respect of securitisation transactions and the raising of wholesale funds'.

Sandler said the decision had the implicit backing of the Government, which is now the bank's sole shareholder. He added: 'We have Government representatives on our board, so the Government will have been kept closely abreast of our thinking.'

Sandler also said the former building society has paid back even more of the Government loan than Chancellor Alistair Darling suggested only last week. Since December, when the loan stood at a peak of £26.9billion, Northern Rock has paid back £15.4billion, taking it down to £11.5billion.

But Sandler warned conditions are getting tougher, and paying back taxpayers' money will become less easy. He still said the total could be paid off by his target date of the end of 2010 but the rate of payback would slow as fewer people redeem their Rock mortgages and more fall behind with payments.

Rock today said the proportion of its 600,000 mortgages that were three months or more in arrears had risen from 1.18 per cent at the end of June to 1.87 per cent at the end of September. The bank repossessed 491 homes in the three months, taking the total to 4201.

Sandler said the Northern Rock would be 'significantly lossmaking this year, and the return to profitability is still some years away'.

He added: 'While what we have achieved so far is encouraging I don't want to create the impression that the task is anything less than onerous.'

However, he would not be drawn on the £37billion bailout of rival banks Royal Bank of Scotland, HBOS and Lloyds TSB.

Northern Rock last week had to close several of its most attractive savings accounts because a rush of money into the bank in September had threatened to breach its agreed cap of having no more than 1.5 per cent of the savings market.