Northern Rock says the intention is to create a single holding company that will own NR and B&B under common management, although under this umbrella, each company will remain a separate legal entity, with its own distinct balance sheet, liabilities and Government support arrangements.
This follows discussions between UK Financial Investments and the management teams of Northern Rock and B&B to explore options for how the two companies could work together.
The intended integration of the two companies will be an extensive process, but a firm timescale has not been announced.
There are no immediate changes for customers and they do not need to take any action.
The proposal will be implemented within EC State Aid rules and will be subject to regulatory approval from the FSA.
Northern Rock Asset Management chief executive officer Gary Hoffman says: “We are pleased to have reached agreement with UKFI and Bradford & Bingley as to how we can move forward together, to deliver maximum value for the taxpayer.
“It also represents an important step towards complete separation of the Northern Rock business, following the legal and capital restructure on 1 January. We are continuing to make good progress against our overall business plan.”