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UK Deepens Involvement in Northern Rock

Britain deepened its involvement in stricken mortgage bank Northern Rock on Tuesday, offering to guarantee more of its liabilities as the struggle to find a private sector acquirer for the business continues.



Britain's finance ministry, which first guaranteed retail deposits in the bank in September, hopes to provide a period of stability for Northern Rock and to protect its credit ratings at a time of turmoil in financial markets.

The finance ministry said Northern Rock would pay "an appropriate fee" for the new guarantees that will cover some unsubordinated wholesale obligations of the bank.

"The previous announcements have created guarantee arrangements for all unsecured retail products of Northern Rock and many of its wholesale deposits and borrowings," the finance ministry said in a statement.

"This announcement extends these arrangements to a wider range of wholesale products."

Northern Rock is being auctioned off after it became Britain's highest profile casualty of the credit crisis. The process has been thrown into doubt recently, but two high-profile suitors remain, including preferred bidder Virgin Group.

Northern Rock's volatile shares opened up more than 2 percent after the Treasury announcement.