NATIONALISED Northern Rock could take a decade to pay back the taxpayer, its chief executive said today.

The admission came as the European Commission approved plans to split the Newcastle-based lender into a good and bad bank.

The restructuring will see an extra £8bn granted to fund mortgage lending in the good bank on top of the outstanding £15bn loan, as well as up to £3bn in capital support from the Treasury.

Asked if it could take a decade to pay back the funds, chief executive Gary Hoffman said: "There or thereabouts."

In March last year Northern Rock was aiming to pay back £26.9bn in support by the end of 2010. It changed policy earlier this year as the rapid repayment was draining funds from the crippled mortgage market.

Mr Hoffman said European approval for its plans was an important milestone for the bank, which was taken into public ownership in February 2008.

The good bank will be much smaller - holding all of the Rock's savings accounts and some of its mortgages, and offer new home loans to customers.

The bad bank will hold the majority of its loans - more than 90 per cent of which are not in arrears, according to Mr Hoffman - and be gradually wound down.

Northern Rock will also be barred from holding more than £20bn in savings deposits and offering mortgages ranked among the top three deals in the market until the end of 2011 - with the exception of deals aimed at first-time buyers and loans of more than 80 per cent of a property's value.

Mr Hoffman said the restructure meant business as usual for customers and said there would be no staff cuts as a result.

The Government is keen to encourage more competition in the UK banking sector with players including Virgin Money expressing interest in a possible deal.

Mr Hoffman said there was no formal sale process under way for the business but added: "It is clear that the UK market is over-consolidated."

He said the bank's brand had proved very resilient despite the financial woes of the business in the past two years and added: "Given than Northern Rock is a brand and a business that, in the words of the Commission, has a viable future, then it is attractive to someone who might want to buy it."

Despite calls to turn the business back into a building society, Mr Hoffman said he had held no discussions with the Government on the subject and added that it would be quite difficult to sell the bank back to depositors.

On approving the state aid support to the business, Europe's Competition Commissioner Neelie Kroes: "The failure of Northern Rock would have had major detrimental effects on the UK mortgage market and the overall financial stability of the UK economy.

"Important structural changes, including the split of the bank into two entities and a significant reduction of its market presence, will allow the bank to become viable in the long-term and limit distortions of competition."

Financial Services Secretary to the Treasury Paul Myners said: "The Government's actions over the past two years to stabilise Northern Rock have protected the savings and deposits of hundreds of thousands of British families."