Biggest Rock shareholder's demands

Philip Richards, chief executive of hedge fund company RAB Capital, said it would be "totally inexcusable" to deliberately force the company into administration by rejecting potential offers from Sir Richard Branson's Virgin and Luqman Arnold's Olivant.

Mr Richards, who bought into Northern Rock only after it fell into crisis this summer, said that either of the bids could result in the Government eventually getting back its £25 billion loan and allow the rebuilding of the bank.

But Liberal Democrat acting leader Vince Cable accused Mr Richards of seeking to "blackmail" the Government and insisted that the best option for Northern Rock was temporary nationalisation.

Although he did not rule out an acceptable deal with Virgin or Olivant, Mr Cable said it looked likely that either would require the postponement or cancellation of interest or the delayed repayment of part of the loan - effectively subsidising shareholders at the cost of the taxpayer.

Mr Richards told BBC Radio 4's Today programme: "We would vote against any offer which seeks to wipe shareholders out or nearly wipe shareholders out, particularly when we know that there are two good offers out there that could lead to complete rebuilding of value for all shareholders."

Asked whether his company would sue the Government if it regarded any eventual deal as unacceptable, he replied: "If it was outrageous enough, we would have to consider our actions, but it is not our purpose. We don't want to be confrontational about this."

He added: "This is a good bank, which is clearly still solvent, according to the Government's own guidelines, and there are two bids out there now which seek to work with shareholders to rebuild value for everybody and which, from the Government's point of view, will give them back their money every bit as fast as a break-up.

"It would be totally inexcusable for this Government to deliberately force this bank into administration."

Mr Richards said the deals being worked on by Virgin and Olivant appeared "pretty reasonable" and were preferable to the prospect of seeing Northern Rock being bought by "vulture funds" which would break the bank up and sell its parts off.