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Chancellor to announce ambitious plan for nationalised lender in Mansion House speech The government is to begin extricating taxpayers from their stakes in the bailed-out banks by kickstarting the sales process for Northern Rock. In his annual Mansion House speech, the chancellor is understood to be planning to tell his audience of bankers that the government hopes to find a buyer for the Newcastle-based lender by the end of the year. The City may regard this timetable as ambitious. George Osborne is expected to spell out that he regards Northern Rock – nationalised in February 2008 – as a symbol of the failure of Labour’s tripartite system of regulation, which required the Treasury, the Bank of England and the Financial Services Authority to communicate with each other. Osborne, who is expected to force banks to ringfence their retail operations to protect taxpayers from another bailout , is also thought to be planning to announce that a draft financial services bill will be published on Thursday to allow the government to begin replacing the tripartite authorities. The FSA is to be broken up and more powers handed to the Bank of England, including a new financial policy committee which meets for the first time on Thursday with the goal of spotting systemic problems in the financial system. Osborne has decided to hang the for-sale sign over Northern Rock a fter receiving advice from UK Financial Investments , which looks after the taxpayer’s stakes in the bailed-out banks, that the time was right to find a buyer. UKFI had received the advice from its City advisers Deutsche Bank, which has concluded that a sale – rather than a stock market flotation – is the best option. A sale to a large existing name will not be permitted, but a newer player aiming to expand its branch network will be considered eligible to bid, as will building societies, which are keen to try to return Northern Rock to the mutual sector it left in 1997. Societies such as Coventry and Yorkshire have expressed an interest, while Sir Richard Branson’s Virgin Money wants to table a bid for Northern Rock, as well as the 632 branches that Lloyds is selling off. But a remutualisation appears to have been ruled out. The Rock has been split into two – a “bad bank” and a “good bank” – since its nationalisation. The arm being prepared for sale is the “good bank”, Northern Rock plc, which has been stripped of the taxpayer loan that was used to prop up the collapsing institution and is funded by retail deposits. Some £1.4bn of capital was injected into the bank by the government last year and is likely to be regarded as a starting point for any bids if the taxpayer is to break even on its investment. Treasury sources have already admitted that Osborne intends to give his backing to plans that will force banks to ringfence their high street operations from riskier investment banking businesses – but fall short of a full separation. Northern Rock Banking George Osborne Jill Treanor guardian.co.uk