THE UK's financial watchdog has denied that its senior management lacked the experience needed to deal with the Northern Rock crisis.

Hector Sants, chief executive of the Financial Services Authority (FSA), insisted his top team was well-equipped with market expertise.

Mr Sants was giving evidence to the Treasury Select Committee amid continuing criticism following the first run on a British bank in modern times.

Questions have been raised over how the regulator, the Government and the Bank of England failed to spot that Northern Rock's business plan left it vulnerable to fall-out from the so-called credit crunch.

"The current team is well-equipped to give market expertise," Mr Sants told the MPs. "I don't believe at all that a lack of understanding of the market is (an) issue here.

FSA chairman Sir Callum McCarthy added that the watchdog made extensive use of head-hunters in order to recruit the best possible staff.

He also insisted that the regulator had managed to head off many potential dangers from the US sub-prime lending crisis.

Significant work had been undertaken to ensure the stability of hedge funds, which had so far escaped major problems, according to Sir Callum.

"I think a lot of the things that have been done have proved effective," he added.