'Bad Bank' Still an Option for UK Economy: Darling

UK Chancellor of the Exchequer, Alistair Darling, told CNBC he will do whatever it takes to stabilize the British economy—possibly including the so-called "bad bank" option—but he insisted that the country must avoid measures that would stem foreign trade.

"We have to be very careful that whatever we do we don’t end up in the situation where you are, one way or another, putting up barriers to trade, because that would make us all poorer," Darling said in the exclusive television interview with CNBC Friday.

Darling said that he hadn’t ruled out the option of using a "bad bank" to help banks with their failed assets.

Watch Ross Westgate's extended interview with Alistair Darling above.

Such an option would involve some form of a government takeover of endangered banks' bad assets, so banks can scratch the assets from their balance sheets and, presumably, carry out more lending.

"We are looking at an insurance scheme for assets that may be impaired, but I’ve also made it clear that I wouldn’t rule out a bad bank, for example … we need a number of options," he said.

Darling supported US Treasury Secretary Timothy Geithner’s public/private partnership strategy and said that as long as governments around the world have the same goal in sight, different policies were acceptable.

"I don’t mind that what people are putting forward is different, the important thing is that we’re all aiming at solving the same problem and we’ve all got the same end in sight," he said.

Darling made the comments at a G7 meeting of finance ministers in Rome, which has brought together global leaders in the hope of hammering out a path for economic recovery.

Underscoring the importance of the meeting’s mission, official data revealed that the euro zone economy suffered its deepest contraction on record in the fourth quarter of 2008.