Rock 'could remain independent'

Northern Rock's brand was not expected to survive the crisis

Northern Rock may stay independent and even keep its current board, according to reports in several newspapers.

The troubled bank had been expected to be sold off, either as a going concern or following a break-up.

But the BBC now understands that the US banks Citigroup and Merrill Lynch are trying to put together a package of £10bn of loans for the bank.

The money would be lent at a lower rate of interest than the punitive 6.75% it is paying to the Bank of England.

The news sent shares in the troubled bank up nearly 9% to 172.5 pence.

Questionable value

Northern Rock was forced to go to the Bank of England for emergency loans because it could not borrow the money it needed from other banks.

The sub-prime mortgage crisis in the US left many banks owning debt that was of questionable value and created uncertainty about their credit-worthiness.

That led to a credit crunch, with banks reluctant to lend their surplus cash to other banks, either because they were concerned they might need the money themselves or because they were not sure the other banks would be able to pay them back.

Northern Rock was particularly hard hit because it borrows an unusually large proportion of the money it lends to homebuyers from other banks.

Board criticised

Other banks tend to get more of the money from their savers.

Northern Rock's board members have been criticised for pursuing a strategy that exposed them to this risk and had not been expected to keep their jobs following a sale.

It had also been expected that Northern Rock would drop its name because of the damage caused to the brand by the run on the bank.

Now newspaper reports have raised the possibility that a loan organised by Citigroup from a selection of US banks and insurers could allow Northern Rock to carry on in its current form.