CHANCELLOR Alistair Darling ruled out the prospect of a quick sale of Northern Rock yesterday, despite winning backing from the European Union to split the troubled lender into a “good” and “bad” bank ahead of a sell-off.<br /><br />EU competition commissioner Neelie Kroes approved the government’s proposals to split the Newcastle-based bank, led by chairman Ron Sandler, towards the end of the year. <br /><br />However, a Treasury spokesman told City A.M. last night that “the government was focused on getting value for money and bringing new entrants into the market” rather than preparing the bank for sale before an expected May 2010 general election.<br /><br />The government will provide Northern Rock with a further £8bn to fund the spilt. The “good bank” will be allowed to increase mortgage lending from £4bn to £10bn in 2010 and up to £21bn by 2011.<br /><br />Once the spilt has been completed, UKFI – the body responsible for managing the government’s bank stakes – will handle both parts of the bank. <br /><br />UKFI, led by new chief executive Robin Budenberg, will decide to sell the good bank to a private buyer when market conditions improve.<br /><br />The good bank will continue to be called Northern Rock and will house £18.5bn of deposits as well as about £10bn of performing mortgages and 76 branches. <br /><br />The rest of Northern Rock’s mortgage book – totalling about £55bn – plus unsecured loans and Treasury assets will be held in a government-controlled asset company and wound down or sold off.<br /><br />The bank said: “The restructure will strengthen the capital and liquidity position of Northern Rock significantly.”<br /><br />However, the EU’s Kroes has imposed some limits on the bank’s ability to write business as a penalty for the £27bn in state aid it has received since it was nationalised last year. These include:<br />•Northern Rock should cut its balance sheet to about a quarter of its size before the crisis;<br />•The bank should not become the market leader in terms of interest rates on loans;<br />•And the bank must limit its retail deposits to slightly less than pre-crisis levels. <br /><br />Suitors for Northern Rock include Virgin Money, which recently applied for an FSA bank licence and National Australia Bank, the owner of Clydesdale and Yorkshire banks.