The Government will have to pump more capital into Northern Rock and Bradford & Bingley to reflect worsening conditions in the housing market, senior bankers believe.

In August, the Government converted £3bn of its loan to Northern Rock into equity to bolster its core tier 1 capital ratio, which had slipped to the dangerously low level of 2.9%.

The Government may have to inject “£2bn to £3bn more” into Northern Rock, a source close to the Government said.

A new capital injection into B&B would be more modest because the buy-to-let specialist is smaller, but it could still require a significant sum to offset rising bad debts.

Daily Telegraph