Rock borrows more as bidders regroup

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Figures released by the Bank show that its holding of "other assets" - which is where the Rock loans appear - increased by £2.2 billion in the last week. If that was all due to Rock, it cancels out the £2.2 billion the former building society raised from the sale of its Lifetime Portfolio of mortgages to JPMorgan two weeks ago.

But Northern Rock shares today advanced by 7p to 111p on growing hopes that the re-opened auction for the bank has succeeded in attracting new bidders.

At the same time, a powerful group of MPs is set to lay into regulators, particularly the Financial Services Authority, over the handling of the collapse.

Cerberus, the US private-equity firm that considered bidding for just a part of Northern Rock before it dropped out of the original auction in December, is now reported to be looking at a revised plan to make an offer for the whole business.

New interest has been sparked by Government's financial adviser Goldman Sachs' proposals to convert Northern Rock's emergency loan from the Bank of England into bonds. If the loan is still rising, it is in all parties' interests to get a deal struck quickly.

The deadline for bids is 4 February, and sources claim a decision on which bid to go for will be made by the Treasury just a week later.

Sir Richard Branson's Virgin consortium bid is still seen as being in pole position, although the plan from Luqman Arnold's Olivant is likely to win more backing from existing shareholders. Hedge funds SRM Global and RAB Capital, which between them own 18% of Northern Rock, have said they would support the large rights issue involved in Olivant's plan.

Along with Cerberus, JC Flowers, another US group which dropped out of the first round of bidding, has asked for details of the Goldman refinancing plan and is considering reopening its proposals. The House of Commons Treasury Select Committee will publish its first report on the handling of the Northern Rock affair tomorrow.

It is expected to be highly critical of the FSA for failing to spot the flaws in the bank's business model.