Taxpayers’ exposure to Northern Rock surged past the £50 billion mark yesterday after the Treasury extended a controversial guarantee to cover hundreds of millions of pounds of the stricken bank’s obligations in the wholesale markets.

The move came as Mervyn King, Governor of the Bank of England, rounded on Northern Rock’s shareholders for standing in the way of a rescue deal.

Amid renewed fears that the two preferred bidders for Rock face stumbling blocks over funding, Mr King also fuelled speculation that the Government might nationalise the lender. He suggested that this “could be used as a means of breaking the logjam and getting to an arrangement which would pass very quickly to a new management team, and ultimately a new ownership team”.

The Governor told the Commons Treasury Committee: “The difficulty of reaching a reorganisation of Northern Rock is made much more difficult by the fact that the shareholders can block what seems to be a sensible discussion of reorganisation by the people who are financing the vast bulk of the balance sheet.”

Coming on top of previous guarantees for retail deposits, yesterday’s expanded measures mean that the Government now stands behind about half of Northern Rock’s balance sheet, last recorded at £106billion. Taxpayers’ total exposure is now put at £56 billion – as much as £1,800 for each of them.

Sir Richard Branson’s Virgin Group and Olivant, an investment firm run by Luqman Arnold, the former chief executive of Abbey National, are joint preferred bidders but a firm deal is not expected before mid-January.

Northern Rock’s two biggest shareholders are RAB Capital and SRM Global, hedge funds that between them hold 15.8 per cent. Together with three other investors, they hold about 23 per cent, almost enough to block a bid.

Both SRM, run by the former UBS trader Jon Wood, and Philip Richards, RAB’s chief executive, are backing Olivant and claim there is no need to sell the bank. Both declined to comment.

In a further twist, it emerged last night that Bradford & Bingley, the mortgage group, may play a part in a rescue package after indications that it has approached Northern Rock about potentially buying a stake.

Goldman Sachs emerged this week as the Treasury’s lead adviser on the Rock sale. It is understood that Goldman is running its own evaluation of the bank’s assets and liabilities and bidders’ funding requirements. It will make a recommendation to the Treasury in the new year. Mr King said a nationalisation of Rock“would clearly be as a temporary measure to relaunch it in some form”.

As the authorities examine reforms in response to Northern Rock, the Governor said that moves in one key area, regulation to ensure banks have adequate liquid funds, will begin today when the Financial Services Authority publishes a consultation paper.

Mr King said that over the next year the Bank would also consider means to enable it to support banks without them becoming stigmatised.

He rejected calls for sweeping change to the controversial “tripartite” system that sees the Bank, Treasury and FSA share responsibility in a crisis. He saw no need for “drastic surgery”.

He also revealed that Ed Balls, the Schools Secretary, who was previously City minister and Gordon Brown’s chief aide, first backed “urgent” action to bring in a new insolvency regime for banks a year ago, amid worries that Britain was vulnerable if there was any bank run.

Mervyn King on the credit squeeze

‘The experience of the last few months has been a chastening one for all the major centres of the financial world’
— Mervyn King on the impact of the Northern Rock debacle and credit squeeze

‘In the last few years we have seen a certain degree of hubris and it's never easy to persuade people who are suffering from that that they are taking risks.’
— on risk-taking that led banks to the losses that triggered the credit squeeze

‘The difficulty of reaching a reorganisation of Northern Rock — which is desperately needed — is made much more difficult by the fact that the shareholders can block what seems to be a sensible discussion of reorganisation ...’
— venting frustration over role of shareholders in finding a solution to Rock's situation

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