Darling tells The Northern Echo split is “essential”

But the Chancellor, visiting the nationalised lender’s headquarters in Gosforth, Newcastle, warned that Northern Rock must learn from mistakes made in the past that caused the bank’s downfall.

Mr Darling said he believed the bank had a strong future ahead of it, and that its recovery proved the Government was right to step in and nationalise Northern Rock, despite taking “a lot of stick”

for doing so.

Speaking to The Northern Echo on his visit to the lender, Mr Darling said approval for Northern Rock’s “essential”

split into two divisions – BankCo, which will hold savers’ money, offer mortgages and carry out lending, and AssetCo, which will bear the brunt of the lender’s £10.9bn Government debt – would be given before the changeover of the European Commission, which will take place next month.

Speculation suggests the “good” part of the bank may be sold.

He said: “Two years ago, it looked like Northern Rock could come to an end, but now we are in a situation where we can see a future.

“Because of Northern Rock’s importance to the economy and its symbolism in the North-East, there has always been a clear importance that we had to do everything we could to help.

“Now, we have good ground to be confident, and it really does show what can be done.

“We took a lot of stick when we nationalised Northern Rock and were told it was the wrong thing to do. But the fact we are sitting in this building today and there are staff to talk to shows it was right.

“It is essential we split the bank, and that will probably happen at the beginning of the year. We have been heavily engaged with the European Commission for months over this issue, and could have waited until next year (for approval of the split) but we want to see Northern Rock back in the mortgage market.”

But Mr Darling added: “This time, people need to be more cautious, more careful not to repeat the mistakes that were made. We are keen to see Northern Rock back in the mortgage market – but with a different model.”

Two years ago, Northern Rock sparked the first run on a UK bank in more than a century when it sought Bank of England finance, in a situation blamed on its sub-prime mortgage offering.

About 1,300 people lost their jobs during the crisis at the bank, which was taken into public ownership last year.

Mr Darling believes that after the separation of Northern Rock into two divisions, it can look forward to a strong future.

He said: “It has been a very tough time for the staff here and a very tough time for the North-East.

“I know a lot of jobs were lost, and the people working here will at times have wondered whether they would still have a job this week or this month.

“But now we are determined to keep doing all we can to ensure Northern Rock has a confident future. Staff here at Northern Rock have played a big part in helping to reach this point, and they can look back with some satisfaction at how far we have come, and have confidence about where we are going.”

Gary Hoffman, chief executive of Northern Rock, added: “It was good for the Chancellor to see first-hand the progress we have made at Northern Rock.

“We have come a long way under our new management team and are looking forwards not backwards.”