UK throws a lifeline to Northern Rock

LONDON: Britain threw a fresh lifeline to Northern Rock on Tuesday, offering to guarantee new retail deposits and extend funding arrangements in a bid to win the bank time to salvage something from its battered business. The latest aid package came as the head of the country's financial services watchdog said Northern Rock may not have needed to draw on emergency funds from the Bank of England at all if its rescue had not been conducted in the full public glare.

Northern Rock, which saw a run on deposits last month after it was forced by the global credit crunch to seek emergency funds from the BoE, said the new package would cost it £40 million ($82 million) to £50 million this year — around 10% of its targeted 2007 profit.

But the bank said the new help would buy it time to assess its full range of options, which include being taken over as a whole, being broken up or attempting to remain independent — a review process it said should be completed by February. Analysts said the new arrangements could help to reassure prospective buyers and allay fears of shareholders and bondholders of a fire-sale of assets.