Darling wants Northern Rock bosses sacked

Senior managers including chief executive Adam Applegarth should be ousted, he believes, to send a message that mistakes and recklessness will be punished.

Mr Darling's view emerged amid concern that the government bail-out of Northern Rock has sent an unwitting signal that blunderers will be rescued by the taxpayer, possibly encouraging banking chiefs to take bigger gambles in the quest for profits.

A source close to the Chancellor said: "The moral hazard point is an important point." Although he said it was up to the bank's owners to decide if the managers had done a good job, he went on pointedly: "I do not think anyone would say that Northern Rock shareholders have done particularly well in the past week."

Punishment for the Northern Rock chiefs could partly answer the warning given by Bank of England Governor Mervyn King just before the crisis broke in public last week when he urged central bankers around the world not to be too eager to bail out firms that got their fingers burnt by taking risks.

He highlighted the "moral hazard" of bankers and shareholders assuming they could profit from high risks that went well and wait for the taxpayer to rescue them if it went wrong. Mr Applegarth, 45, was paid a total of £1.3 million last year and his salary was recently raised from £690,000 to £760,000.

Other big names on the board include David Baker, deputy chief executive, who this year received a 16 per cent rise in basic pay to £530,000. Keith Currie and Andy Kuipers, the treasury and commercial directors, enjoyed 14 per cent rises in basic pay to £415,000.

Derek Wanless, one of Gordon Brown's favourite advisers on the NHS, is one of several City grandees on the board as a risk adviser.

The blame game over the crisis was in full swing today, with ministers accusing banks of heedless over-lending in recent years, while the Conservatives said Gordon Brown was at fault for failing to rein in ballooning debt levels.

There were reports that Mr King's head could be on the block for his failure to speak out at the height of the crisis.

The Daily Telegraph reported that he could become the first Bank governor for 40 years not to have his five-year contract renewed for a second term when it is up for review in November.

A source close to Mr Darling said no decision had yet been considered over whether Mr King would be reappointed.