The deal is expected to value the nationalised lender at about £1bn, resulting in a short-term loss for the taxpayer, which was forced into a £1.4bn rescue of the failed bank, the BBC reports.

Addressing the Lord Mayor’s Banquet for Bankers and Merchants of the City of London last night, George Osborne said it was time to “get at least some of our money back”, and that “any interested party can bid, including mutuals”.

It is expected Virgin Money, Coventry Building Society and Yorkshire Building Society will be among the bidders, and the sale process could start within the next month.

Although the sale of the “good bank” part of Northern Rock is likely to generate a loss, this will be offset in the longer term by the repayment of tens of billions of pounds of state aid loans held in the “bad bank”, now known as Northern Rock Asset Management.

Osborne said last night: “We will continue to own Northern Rock Asset Management, the separate “bad bank”, whose assets are being run down over time.

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“This does not mean that other options to return Northern Rock to the private sector have been ruled out.

“But the independent advice I have received is that a sale process is likely to generate substantially the best value for the taxpayer and should be explored as a first option.”

To ensure investors bear the brunt if things go wrong for banks in future, Osborne endorsed the findings of the Independent Commission on Banking, led by John Vickers, recommending high street banks be ring-fenced.

The final report is still to come, he said, but it was key that all banks should be allowed to fail safely without affecting vital banking services and at no cost to the tax payer.

The Chancellor also announced the first meeting of the Financial Policy Committee (FPC) would be held today, the body tasked to monitor overall risk in the financial system, identify bubbles, spot dangerous practice and combat risk.

The Committee will work alongside the Prudential Regulation Authority and consumer and markets watchdog the Financial Conduct Authority.

“You will have the freedom to innovate, grow your businesses, and compete in the world,” he said, but warned, “You will be constrained if you put taxpayers or consumers at undue risk.”

Osborne said he wanted to see the full implementation of the Basel standards across the globe and welcomed the new European Banking Authority, which will headquarter in London.

 

For the full speech, click here