Paul Myners has stepped down as a director of the Bank of England while he works with JC Flowers on the private equity firm’s takeover bid for Northern Rock.

Mr Myners, a member of the Bank’s Court, was excused from his duties with immediate effect after an “approach to him by JC Flowers in relation to a proposal they are contemplating with respect to Northern Rock”, the Bank said yesterday.

The high-profile government adviser was one of a team of experienced banking figures announced yesterday by the firm as part of its potential bid. While Northern Rock is reliant on an unlimited line of funding from the Bank, there was a potential conflict of interest for Mr Myners.

JC Flowers executives, including Ravi Sinha, the European managing director, met Northern Rock’s management yesterday, but it was thought that the meeting was to discuss due diligence issues rather than to come to a landmark agreement.

Sources cautioned against expectations of an imminent offer. It is understood that, unless Northern Rock is able to secure funding to ease the bank’s transition from the Bank of England’s unlimited lending facility to new owners, most interested parties are reluctant to table a formal offer.

Citigroup has agreed to put up £10 billion to be used by a buyer but is thought to be finding it difficult to get other banks to join the syndicate. An estimated £25 billion to £30 billion is needed to keep Northern Rock in business. Yesterday, Credit Suisse analysts calculated that Northern Rock’s rate of borrowing from the Bank was speeding up. On average, the bank has borrowed £3.5 billion each week in the six weeks since the lending facility was put in place. In the past week the loan jumped to close to £21 billion, an increase of £4.6 billion.

A buyer of Northern Rock, which is thought to have enlisted Blackstone, the private equity firm, as an adviser on funding options, would have to repay the Bank of England, as well as cover an estimated £14 billion of short-term financing that will come due in the next six months.

Blackstone, which will be working alongside Merrill Lynch and Citigroup, is not thought to be planning to bid for Northern Rock.

Sir Richard Branson’s Virgin Group has already made an approach to Northern Rock. Virgin hopes to take a controlling stake in the Newcastle-based bank, backed by investors including the insurance giant AIG, Wilbur Ross, the American distressed debt specialist, and Toscafund, the hedge fund manager founded by Martin Hughes. Virgin is being advised by Sir George Mathewson, the former chief executive and chairman of Royal Bank of Scotland, who masterminded the takeover of larger rival NatWest.

JC Flowers’s proposed management team includes Richard Pym, the former chief executive of Alliance & Leicester, and Hugh Scott-Barrett, the former finance director of ABN Amro. The team is being advised by Bob Bennett, who was finance director of Northern Rock between 1993 and 2006. Other advisers are Peter Birch, who ran Abbey National and has chaired Kensington and Trigold, the mortgage companies, and Sir Martin Jacomb, who chaired Prudential and BZW, and was deputy chairman of Barclays.

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