More than 2,000 staff at nationalised mortgage lender Northern Rock face losing their jobs, it was reported today.
The cuts are expected as part of chairman Ron Sandler's restructuring plans for the Newcastle-based group, taken into public ownership in February after being forced to seek a Bank of England funding bail-out last year.
Up to a third of Northern Rock's 6,500 staff are to go as Mr Sandler seeks to shrink the business and cut the lender's balance sheet to around half the current £113 billion, the Financial Timesreports.
The Treasury was unavailable for comment on the report, which said Mr Sandler will outline plans for the business to local MPs and unions today. Northern Rock said it would make a statement later today.
Chancellor Alistair Darling is said to be readying a "rapid reponse" team in tandem with the regional development agency One NorthEast to ease the impact of the job losses on the lender's heartland.
Yesterday Mr Darling gave formal notification to the European Commission of plans to continue with the funding support to Northern Rock, which has run to an estimated £24 billion sterling so far.
The job cuts and the shrinking of the troubled business are necessary for the Government to comply with European rules on state aid, to prevent distorting competition in the banking sector.
The commission is expected to investigate the Government restructuring package but approve the state aid as long as Northern Rock eventually becomes less dependent on the state subsidy.
Northern Rock - whose customers are 100 per cent guaranteed by the Government since the Bank bail-out - is looking to encourage savers to boost its deposit base, while offering high mortgage rates to deter homeowners.
The lender became the first major victim of the credit crunch last September after its borrowing costs soared - sparking the first run on a bank in more than 140 years.