Northern Rock should be split into two businesses, with retail deposits in one unit and mortgages in the other, according to investment bankers examining the feasibility of a sale of the bank, accrdoing to The Times.

Under such an arrangement, which is one of a number of options being considered, the Treasury would try to sell the £19.5bn package of retail deposits separately from the £66.7bn Northern Rock mortgage book. In this instance, the buyer of the mortgage business would have to assume the bad loans held by Northern Rock.

The Times