Brussels - European Union regulators Wednesday approved British plans to restructure Northern Rock, one of Europe's most high-profile victims of the global credit crunch.

The nationalised bank is to be split into a "good" bank, which will hold savers' deposits and continue normal operations, and a "bad" bank, which is to run down its riskiest assets.

By limiting the new Northern Rock's exposure to the company's reckless past investments, the "good" bank's long-term viability should be restored, officials in Brussels concluded.

"The failure of Northern Rock would have had major detrimental effects on the UK mortgage market and the overall financial stability of the UK economy," said EU Competition Commissioner Neelie Kroes.

"Important structural changes, including the split of the bank into two entities and a significant reduction of its market presence will allow the bank to become viable in the long-term and limit distortions of competition," Kroes said in a statement.

The British government has injected tens of billions of pounds of British taxpayers' money to save Northern Rock, which was formally nationalised in 2008.

An investigation by the European Commission in Brussels, which acts as the guardian of the EU's single market, concluded that Northern Rock's revised restructuring plan had been kept to "a necessary minimum".

Northern Rock plc, a mortgage lender based in Newcastle-upon-Tyne, made international headlines in September 2007, when scores of anxious customers, fearing the bank's imminent collapse, queued up outside its branches to withdraw their savings.

Prior to the credit crunch, the bank had grown rapidly to become Britain's fifth largest mortgage bank, with a balance-sheet total of 101 billion pounds and a market share in the mortgage lending business close to 10 per cent. (dpa)