The restructure will go through on 1 January and the bank will be split into two separate companies. Northern Rock plc will be a savings and mortgage bank that will offer new savings accounts and lend new mortgages, as well as service all existing customer savings accounts.

Northern Rock (Asset Management) plc will hold and service the majority of the existing mortgages (worth around £50 bn), all unsecured loan accounts, the Government loan and the Company’s outstanding wholesale funding and subordinated debt as at the Transfer Date.

The majority of mortgage accounts will remain in the existing company, Northern Rock (Asset Management) plc, and a proportion of mortgage accounts will be transferred to the new bank, Northern Rock plc. Retail deposits will continue to be guaranteed in the new bank following the restructure.

At the transfer date, it is expected that over 90% of the mortgages held by Northern Rock (Asset Management) plc will be fully performing and not in arrears. The portfolio will include the Company’s residual interest in those mortgages which have been sold to the Granite securitisation programme and the Northern Rock covered bond programme.

As part of the restructure, the Government loan will increase by approximately £8bn to provide cash to be transferred to the new bank to support its retail deposit book and new lending activity.

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The European Commission confirmed on 28 October that it had approved the restructuring plan for Northern Rock and the lender is continuing to work closely with the FSA to gain the necessary regulatory approvals for the two companies.

The Government wholesale guarantees for Northern Rock (Asset Management) plc, will remain in place following completion of the restructure. Any decision to release this guarantee is subject to a minimum notice period of three months and fixed term accounts will retain the guarantee for the term of the product.

Gary Hoffman, chief executive of Northern Rock, said it wanted to make it a seamless process for its customers

He added: “We will be writing to them in early January confirming which company holds their account – but we have already confirmed that all savings accounts will be in the new bank. I am pleased with the progress to date and all of the hard work colleagues are doing behind the scenes to ensure this is a smooth process for customers.”