Northern Rock bosses offered their resignations in the face of the crisis

The Treasury select committee heard that chief executive Adam Applegarth and chairman Matt Ridley offered to step down.

But Northern Rock's independent director Sir Ian Gibson turned them down after consulting the shareholders.

MPs yesterday accused them of damaging the "good name of British banking" and said they made basic errors in the run-up to the crisis.

During bitter exchanges, Mr Applegarth and Mr Ridley insisted the bank was hit by a "completely unpredicted" chain of events.

Mr Ridley said Northern Rock had sought to find different sources of funding and could not have predicted the world-wide closing of credit markets after the collapse of the US "sub-prime" mortgage market.

The bank's bosses have been widely criticised for focusing on short-term money raised in the wholesale markets to balance its books against longer-term mortgage loans.

Last week Chancellor Alistair Darling admitted Northern Rock's aggressive business model made it "particularly vulnerable" to the global credit crunch.

The Newcastle-based firm was forced to turn to the Bank of England as an emergency lender last month.

The news led to queues of depositors taking out their savings and triggered panic in the money markets.

Mr Ridley insisted: "The idea that all markets would close simultaneously was unforeseen by any major authority.

"We were hit by an unexpected and unpredictable concatenation of events."

But his comments drew a scathing response from Tory MP Michael Fallon, who demanded to know why he had not resigned."

Mr Fallon said: "You are the chairman of the bank that ran out of money, that caused the first bank run in this country for 150 years.

"You have had to borrow billions of public money from the Bank of England. You have damaged the good name of British banking. Why are you still clinging to office?"

Scroll down for more ...

Mr Ridley said he was working "night and day" to turn around the situation at the bank.

"I serve at the behest of the board, and if they think that they can do better by asking for my resignation, it will be available to them," he said.

Committee chairman John McFall accused the bank of ignoring a "red alert" warning issued by the Bank of England in April of a sharp reduction in international credit and described Northern Rock chiefs of being "arrogant and in denial" for believing that they did not have a hand in causing the series of events which led to the funding crisis and bank run.

Mr Applegarth insisted the bank began taking steps as early as last March to reduce its exposure.

Northern Rock confirmed it had already drawn £13billion in funding from the Bank of England and may need to go back.

The bank's nonexecutive director, Sir Ian, later told the committee: "In the days of the run, from the chief executive to the chairman, everybody said they would be willing to resign.

"I consulted with brokers, shareholders and the overwhelming feedback was "you can worry about that later", what you need to do now is direct the bank through a crisis, and when the crisis has passed, that's the time to think about the make-up of the board."

The revelations came during the committee's third hearing into the Northern Rock crisis.

The influential panel of cross-party MPs has already quizzed the Financial Services Authority and Bank of England governor Mervyn King.