Alistair Darling vowed yesterday to “veto” any offer for Northern Rock that failed to safeguard taxpayer loans as its shares fell sharply on news that early proposals were “materially” below its share price. Financial Times, The Times, Daily Telegraph, Independent, Guardian.

Talks with interested bidders for Northern Rock are likely to go on until February as the troubled bank admitted that the bids it had received so far were too low to satisfy shareholders.

Nationalising Northern Rock remained an option he was ready to contemplate unless potential buyers could show how they intended to pay back the £20bn-plus loans made by the Bank of England.

Darling wants the bank sold as a going concern, but knows the political danger of allowing billions of pounds in public support to be lost to the Exchequer or turned into private profit. The government is also guaranteeing about £20bn of Northern Rock deposits.

The Treasury issued a “principles” paper warning there was no guarantee that the Bank of England loans would continue beyond next February and that it favoured a deal requiring the least public support.

If the loans were extended – as most in the City expect – it would need state aid clearance from Brussels.

Northern Rock is understood to have now received most of the 8-10 proposals that it has been expecting, including some pitched 'aggressively low”. Shares fell by 21% to 104.2p, valuing the bank at around £440m.

Cerberus, the US private equity firm, has dropped plans to table a bid for Northern Rock.

Advisers to Northern Rock are likely to continue discussions with potential suitors until the Government’s deadline for the cut-off of emergency funding to the bank, sources said. To conclude a deal any quicker could result in accusations that they had not explored every option for extracting value from Northern Rock, they said.