State aid for Northern Rock under scrutiny

Concerns that Northern Rock will be able to abuse its government-owned status to beat rivals are mounting ahead of the publication next week of an EU investigation into state aid for the Newcastle-based lender. The much-anticipated document on the government’s plans to split Northern Rock into a ‘good’ bank, bolstered with £14 billion of taxpayer funds to fuel mortgage lending, and a ‘bad’ bank, containing most of the troublesome legacy loans, will be followed by a month when interested parties can lobby the European commission. The Building Societies Association is concerned that Northern Rock might be able to squeeze out its members, many of which are already struggling in the downturn in demand for home loans.