The European Commission has launched an investigation into the government’s rescue of Northern Rock.
The commission says it has begun investigating whether its rules on state aid are being violated, amid fears that the lender may have an unfair advantage against commercial rivals.
The bank is now offering some of the most competitive savings deals on the market.
The Treasury’s guarantee that all NR’s retail deposits are safe up to maximum levels will also come under scrutiny.
Neelie Kroes, competition commissioner, says: “The commission needs to open a formal investigation into UK measures to restructure NR to ensure legal certainty, notable in view of the large scale of the aid measures, the background of current conditions in financial markets and the risks of distortion of competition.”
Under EU rules, a government may not provide rescue aid to a company for more than six months.
Longer-term funding can only be provided as restructuring aid.