Downing Street has defended Mervyn King's governance of the Bank of England amid criticism of his handling of the Northern Rock affair.

As King faced questions from the Commons Treasury committee, the prime minister's spokesman said on Thursday that Gordon Brown "has full confidence in the governor".

Asked about the issues raised during the questioning, he said all of them "are discussed as part of the tripartite committee", made up of the Financial Services Authority, the Treasury and the BoE.

"The governor has expressed his view this morning," the spokesman added.

Number 10 flatly denied there had been any political interference in the bank's decision to provide £10bn "liquidity" to protect the banking industry, saying: "The important issue now is to restore stability in the financial system."

'U-turn'

Earlier, John McFall, the chairman of the cross-party Treasury committee, opened the session by asking why King had made an apparent U-turn by offering the cash.

McFall said that some of the handling of Northern Rock's difficulties had created "sheer and absolute panic" in the financial markets.

But King defended the Bank of England's conduct and said that under the current circumstances said there was "no threat to the stability of the banking system."

On Wednesday King said banks would now be able to borrow billions in capital from the Bank of England over longer-than-normal three-month periods.

He also conceded that the Bank would accept mortgages and mortgage-backed securities for these loans as collateral.

Previously King had insisted that this action would amount to bailing out institutions that had made risky or reckless lending decisions.

He gave warning that doing this "sows the seeds of a future financial crisis".

Picking up the apparent inconsistency McFall said that "someone should have seen the risks" arising from current global economic conditions.

And he said he was not "getting much comfort" by the "obfuscation" of the answers from King and his colleagues.

Thursday's newspapers agreed that it is a testing time for the governor, with the Times reporting that he is being privately criticised in Whitehall for staying silent as the crisis unfolded last weekend.

The Guardian reported that there has been a whispering campaign in the City, while the Telegraph said the committee will want to know if King was "leaned on" by the Treasury or Number 10.

And there is criticism over what the FT calls a "striking policy U-turn", after the Bank decided yesterday to inject billions of pounds into the system.

Some commentators suggest that the action should have been taken much earlier to avert a similar crisis to those in the US and other European countries.