There is increasing speculation that struggling British lender Northern Rock will be taken over by the British government.
This came as the bank - which owes an estimated £24 billion in emergency funding - prepares to face down shareholder demands for a greater say at an extraordinary meeting in Newcastle tomorrow.
Hedge funds SRM Global and RAB Capital, which together own around 18% of the lender, want to limit the board's ability to sell assets and issue shares without prior approval, but Northern Rock chairman Bryan Sanderson has said the 'potentially damaging' measures could hinder a rescue.
It emerged this weekend that former Lloyd's of London chief executive and City trouble-shooter Ron Sandler had been recruited by Britain's Treasury to head the bank if it is nationalised. The move provoked speculation that a nationalisation of Northern Rock could be just days away.
Potential buyers, Virgin and Olivant, are reportedly struggling to secure financing and time is said to be running out for the British government to find an alternative. British Chancellor Alistair Darling said today that a decision over the lender's future would have to be made 'very shortly'.
Northern Rock was at the centre of the UK's first bank run in nearly 150 years four months ago after soaring borrowing costs in the credit crunch.
It has borrowed an estimated £26 billion in emergency funding from the Bank of England so far, although it sold more than £2 billion worth of mortgages to JP Morgan to ease its burden.
