EU expands probe of British aid package for Northern Rock

Special Report: Global Financial Crisis

BRUSSELS, May 7 (Xinhua) -- The European Commission said Thursday it has expanded its investigation of a British aid package for mortgage lender Northern Rock.

The British government made substantial amendments last month to its original rescue package for the bank, prompting the Commission, the European Union's executive arm, to widen its probe into the assistance.

The main change was the split of Northern Rock into a "good" bank that would continue commercial activities, and a "bad" bank with most of the old mortgage loans, which would be wound down.

The Commission said in a statement that it has to "examine, whether the changes will enable Northern Rock to return to long-term viability while avoiding undue distortions of competition."

"The Commission needs to look into the changes made by the UK to the original package for Northern Rock to ensure legal certainty. In view of the large scale of the aid measures this is standard procedure," said EU Competition Commissioner Neelie Kroes.

Before the financial turmoil, Northern Rock was the fifth largest mortgage bank in Britain with a balance-sheet total of 150billion euros (200 billion U.S. dollars) as of Dec. 31, 2006. Its core activity is residential mortgage lending, which represents more than 90 percent of all outstanding loans made by the bank.

The British government had to nationalize the bank in February 2008 after earlier rescue measures failed to keep it afloat.