British Treasury and Bank of England officials are reported to be drawing up contingency plans to pay Northern Rock's depositors their money if the troubled UK lender has to be put into administration.
According to the Financial Times, the plan would see the central bank buying Northern Rock's deposits and swiftly paying the balances back to customers.
The FT says that if Northern Rock's shareholders or bidders make demands on UK taxpayers' money that the authorities regard as unreasonable, preparations are being finalised to withdraw the British government's financing of the bank and take control of savers' deposits.
The Treasury and BoE have said they want a successful acquisition of Northern Rock, but are aware they need a fall-back position in case negotiations over a sale fall through.
The Treasury gave a 100% guarantee on all retail and wholesale deposits, including those in Ireland, in September to stop the run on Northern Rock. But it had always been unclear how that guarantee would work in practice.
Yesterday it was reported that British Chancellor Alistair Darling had asked Northern Rock to consider rival bids to the one launched by Richard Branson's Virgin Group.
