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Chancellor Alistair Darling has authorised the Bank of England to provide emergency funding to mortgage lender Northern Rock, it has been confirmed.

Experts have reassured the lender's customers that their savings and home-loans will be unaffected by the move, which comes amid claims that Northern Rock is struggling to raise cash to finance its operations in the wake of an ongoing global credit crunch.

Analysts say that the Bank of England's decision to act as a lender of last resort is extremely rare, although Barclays is believed to have turned to the central bank for emergency funding last month after a technical problem in the UK's clearing system.

In a joint statement issued this morning, the Treasury, Bank of England and Financial Services Authority (FSA) confirmed that short-term emergency credit would be provided to Northern Rock, which will have to pay back the money at "an interest rate premium".

"This liquidity facility will be available to help Northern Rock to fund its operations during the current period of turbulence in financial markets while Northern Rock works to secure an orderly resolution to its current liquidity problems," the statement confirmed.

However officials stressed that the FSA judged Northern Rock to be "solvent", with analysts claiming that the move does not mean that the business is in trouble.

A separate statement issued by Northern Rock confirmed that the lender had "taken action to preserve liquidity and to maintain margins on its current loan book".

"It has now become clear that the global credit and liquidity markets have not recovered in the early part of September, and that there continues to be a severe liquidity squeeze," the company stressed.

The decision to grant Northern Rock emergency cash comes amid concerns that banks are becoming increasingly reluctant to lend money to one another on the wholesale market, as credit dries up in the wake of ongoing problems in the US housing market.

Share prices across the globe have been fluctuating in recent weeks as a result of rising default levels in the US sub-prime mortgage sector, which makes home-loans available to those on low incomes or with poor credit ratings.

Traders fear that the problems could spread to the wider economy if banks become less willing to lend cash to consumers and businesses as a result of losses they have made due to exposure to bad debts in the sub-prime sector.

Earlier this week Abbey became the first UK high street lender to announce that it was raising its mortgage rates amid the current turmoil, with banks now believed to be stockpiling cash in order to cover their own debt liabilities.

Speaking about the situation last night, the chairman of parliament's treasury select committee criticised the way banks and other financial institutions deal with risk in today's global economy.

Labour MP John McFall told BBC Radio 4 that the committee had been investigating the way that debts were re-packaged and sold on by financial organisations, warning: "No one can tell us where the risk lies".

He added that there was a "huge obligation" on banks and commercial organisations to be transparent about their operations in order to ensure financial stability.