UNIONS were holding urgent talks last night with Northern Rock management over the future of the bank's 6,500 workers.

Talks took place after another bruising day on the stock market in which millions of pounds were wiped off the bank's value and the possibility of a take-over loomed ever larger.

Officials from United, which represents many of the bank's staff, met management to demand assurances over the security of jobs.

City analysts believe a bargain basement bid for the bank is inevitable, but have warned that any buyer might not need the Northern Rock's 76-branch network.

The bank reassured staff last week that there would be no compulsory job losses as a result of the crisis, but unions want assurances that the company is not seeking voluntary redundancies among the workforce, 4,700 of whom are based in the North-East.

Unions and management confirmed that talks had taken place yesterday, but remained silent about the outcome last night.

The news came on the day Bank of England governor Mervyn King revealed to MPs he had been aware of the impending crisis at the Newcastle-based bank on August 14 - a month before matters came to a head - but had been powerless to intervene because of financial legislation, which outlawed a secret rescue plan.

Mr King, whose job appears to be on the line over the bank's handling of the affair, said EU rules and Government legislation prevented him from mounting the "covert action" that could have averted the crisis.

In evidence to the Treasury Select Committee, Mr King said that Northern Rock had been left to try to find a solution to its credit problems, but had been unable to resolve its issues.

Mr King said: "If we had jumped in within a week, that could have been very damaging to Northern Rock as an institution.

"At that point, there didn't seem much point in blowing up the train before it hit the buffers."

He added: "In the 1990s, the Bank of England might have dealt with the situation by acting covertly as lender of last resort, without publishing it until after the process had finished.

"That would have been my preferred course, to avoid creating concerns among depositors."

The governor added that the thousands of savers who queued up to withdraw their cash at the height of the crisis were being "perfectly rational".

He said: "Once they had seen that there was bad news about Northern Rock, it is not that surprising that perhaps they thought it was safer to take their money out."

Northern Rock shares continued their roller-coaster ride on the Stock Exchange throughout yesterday. After opening at 257p, the share price plunged to 174p, before a late rally saw prices close at 185.2p - a fraction of the 670p at which they were trading hands on the eve of the crisis.

The share price collapsed after the Government said its guarantee to Northern Rock customers would not include new accounts.

The Treasury said it would be unfair to other banks and building societies if its guarantee covered all savings at the crisis-hit group.

But it said it would extend its safeguard to include former customers who had closed their accounts between Thursday last week and Wednesday this week, but reopened them in future.

In a statement, the Treasury said its guarantee would cover all accounts existing at midnight on Wednesday.

It would also extend to include future interest payments on these accounts, the movement of funds between existing accounts and new deposits paid into existing accounts.

The Treasury added that the guarantee would remain in place while the instability in the financial markets continued.

The Government stepped in to guarantee people's savings at Northern Rock on Monday after an estimated £3bn was withdrawn from the bank by panicking customers, including some who started queuing in the early hours to get their hands on their savings.

Shadow Chancellor George Osborne yesterday wrote to Chancellor Alistair Darling, offering the co-operation of Conservative MPs in implementing as "an urgent priority" the changes to legislation proposed by Mr King.

Liberal Democrat Treasury spokesman Vince Cable said: "Mervyn King should not be blamed for inheriting a flawed system of bank supervision designed by the current Prime Minister, and which he is endeavouring to operate properly."