Recriminations over the UK government’s rescue of Northern Rock started in earnest on Tuesday when it emerged that the FSA watchdog body had repeatedly urged the Bank of England to intervene to avert a crisis of confidence at the UK mortgage lender. FSA officials had pressed the Bank to widen the types of collateral it would accept when lending to financial institutions. But the Bank initially refused, arguing it would promote moral hazard. News of the tensions came as depositors and investors responded positively to the government’s Monday decision to guarantee all bank deposits. Shares in Northern Rock closed up 8% at 306p as other bank stocks also bounced back. Mervyn King, Bank governor, is expected to face questions about his stance on Thursday when he appears in front of MPs at a parliamentary select committee.