Northern Rock's government rescue won approval from EU regulators as UK prime minister Gordon Brown said he is keeping open the option of nationalising the bank in case efforts to sell it fail.
"All options are on the table, but we are trying to find a private buyer,'" Mr Brown said during a weekly question session in the UK parliament yesterday
"Any settlement with any potential buyer will insist that public funds are properly protected."
The European Commission yesterday approved emergency loans from the Bank of England and Treasury guarantees given to Northern Rock since September 14th. The EU antitrust regulator in Brussels withheld judgment on future aid, including any write-off of debts that may total about £25 billion.
The approval improves the chances of selling Northern Rock to bidders led by the Virgin Group or other suitors, possibly including JC Flowers & Co, Olivant Advisers and Cerberus Capital Management.
Without the clearance, the Newcastle-based bank faced the prospect of being forced to repay the aid immediately.
The EU forbids subsidies that distort competition. EU competition commissioner Neelie Kroes said in a statement yesterday that she will continue to "work closely with the UK authorities during any discussions on the future restructuring of Northern Rock." Other plans would "have to be assessed on their own merits," the commission said in a statement.
Northern Rock's stock has fallen 85 per cent since the bank announced it had sought emergency funding on September 14th. As well as offers to buy the company, Northern Rock has received proposals from companies, including UK lender Bradford & Bingley, to buy some of the bank's mortgage assets.
Shares in the bank fell 2.9 per cent to 100p in London yesterday.
"Virgin remains the preferred bidder, and we have accelerated discussions with the consortium," Northern Rock spokesman Brian Giles said.
"There can be no certainty of this outcome, and the board continues to explore other options," Mr Giles said. - (Bloomberg)
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