Chancellor George Osborne has confirmed the government is to dispose of state-owned bank Northern Rock.

Speaking at the Lord Mayor's banquet, Osborne said 'any interested parties' would be able to bid for the bank, highlighting the possibility of a sale to a financial mutual.

He said, 'Images of the queues outside Northern Rock branches were a symbol of all that went wrong, and its chaotic collapse did great damage to Britain’s international reputation.

'Its return now to the private sector would help to rebuild that reputation. It would be a sign of confidence and could increase competition in high street banking.'

He added, 'We will continue to own Northern Rock Asset Management, the separate “bad bank”, whose assets are being run down over time.'

Osborne said although a sale was likely to generate the best value for the taxpayer, the government had not ruled out other options.

During the same speech, the chancellor slammed the tripartite system of regulation - involving the Financial Services Authority, Treasury and Bank of England - which failed to prevent the banking crisis.

He said the failure of the system - introduced by the previous government - was 'hard-wired into its design'.

Osborne said 'all banks' should be allowed to fail without 'vital banking services' being affected, proposing a ring fence for retail operations.

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