Plans to slice Northern Rock into good and bad assets have been delayed by two months, even though the European Commission is on the brink of approving the break-up and private sale of the lender.

The Treasury had hoped to carve up the bank by the end of October in a move that would have enabled it to compile formal sale documents and to secure a buyer before the General Election next year.

But The Times has learnt that the plans have encountered logistical difficulties, understood to include technology issues.

The Treasury is believed to be quietly confident that Brussels will agree to the carve up of the state-owned assets next week and that there are no remaining substantive European competition concerns.

Gordon Brown is determined to return one of Britain’s bailed-out banks back to the private sector before the election to prove to voters that it was a Labour Government that successfully steered the economy towards recovery and solved the financial crisis.

The Treasury and its banking advisers have been racing to carve up the lender over the summer.

In October 2007, Britain’s then fifth biggest mortgage bank collapsed, forcing the Government to bail it out with £25 billion worth of liquidity support. The bank was formally nationalised in February last year.

A formal investigation was launched by Brussels in April 2008 on the Government’s plan to supply more bail-out funds to Northern Rock so that the lender could start offering loans again.

The bank has since agreed to cap its share of some business areas and a modified restructuring plan was submitted in May. It proposes the lender should be split into two — BankCo will hold its retail deposits and most of the good assets and undertake new loans while AssetCo will hold and run-off most of the loan book.

A decision from Neelie Kroes, the EU Competition Commissioner, had been expected by the year end.

It is believed that the Treasury favours a private sale of the “good bank” because it would prove less risky than a stock market float. While both Tesco and Virgin had expressed an interest in buying the good bank, the supermarket group indicated at its results meeting earlier this month that it was no longer pondering such an acquisition. A buyer for the distressed loan book will also be sought.

The ultimate responsibility for the Northern Rock asset disposal falls to UK Financial Investments, the body set up to look after the taxpayer stakes in the bailed out banks.

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