Plans to split the nationalised bank Northern Rock in two have been approved by the European Union.
In a move that it is hoped will clear the path for the partial sale of the bank, two separate companies will be created.
Northern Rock plc will hold all customer savings accounts and some existing mortgage accounts, while offering new savings products and lending as well.
The outstanding Government loans and existing residential mortgage book will be looked after by a second company, Northern Rock (Asset Management) plc.
While the restructure is expected to be complete by the end of 2009, customers of the bank have been told business continues as usual and that they do not need to take any action.
The Government guarantee of the bank's retail savings remains in place but will be reviewed once the changes are confirmed.
"Receiving approval from the European Commission is an important and positive step for Northern Rock, our customers, employees and the Government," said Gary Hoffman, chief executive of the bank. "We are delivering on our promises."
However, concerns over the move have been voiced by Liberal Democrat Shadow Chancellor, Vince Cable, who said the Government should resist the temptation to use the bank for its own political ends by selling it off before the General Election.
"While the EU is right that there should be greater competition in the financial sector, splitting Northern Rock into 'good' and 'bad' banks risks leaving the taxpayer with the scraps while the private sector gets the prime cuts," Mr Cable added. "It should only be sold when market conditions are right and the taxpayer gets a good return on their investment."
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