UK Chancellor sets out rules on Northern Rock sale

British Chancellor Alistair Darling will set out the UK government’s principles for the sale of troubled lender Northern Rock today.

British Chancellor Alistair Darling will set out the UK government’s principles for the sale of troubled lender Northern Rock today.

Mr Darling is expected to give a statement to the British parliament at 3.30pm.

Advisers to the Chancellor are said to be in talks with Brussels officials over ways to continue the Bank of England’s emergency loan without breaking European Union rules on state aid.

Mr Darling may announce that any successful bidder can keep the loans already made to stricken Northern Rock, thought to total around £25bn (€35bn).

It is understood the “statement of principles” will focus on three basic points. They are that any sale maintains the financial stability of the UK, protects depositors in the bank and protects the taxpayer.

Reports suggested Mr Darling had been working on plans to allow Northern Rock’s £25bn (€35bn) rescue loan to be extended to any buyer of the crisis-hit group.

Northern Rock chief executive Adam Applegarth and a number of non-executive directors announced their resignation late on Friday as the informal deadline for bids passed.

Reports suggest as many as eight parties have expressed interest in Northern Rock, although so far only four have gone public with proposals.

They are New York-based private equity firm JC Flowers, Richard Branson’s Virgin Money, Cerberus, another US private equity firm, and Olivant, an investment group headed by former Abbey chief executive Luqman Arnold.

The key hurdle for any proposals will be dealing with the huge Bank of England debt racked up by the company.

The loans are technically deemed to be rescue aid under EU rules and the regulations are said to block the bank from receiving state aid for longer than six months – giving the group a deadline of February.

Reports suggested that Treasury lawyers were hoping to get round the rules by changing the status of the loans to “restructuring aid”, which would help smooth the way for a takeover.

Mr Darling said last week that he wanted the future of Northern Rock sorted out in a “matter of weeks”.

Newcastle-based Northern Rock was thrown into turmoil in September when it was forced to turn to the Bank of England for emergency lending after its borrowing costs soared amid the summer credit crunch – sparking the first run on a UK bank in more than 150 years.

Mr Darling was forced to step in to guarantee the deposits of the bank’s customers after thousands queued to withdraw their savings two months ago.

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