Britain said it may offer financial help to potential rescuers of Northern Rock, even though this would need to be approved by the European Union, as it emerged proposals put forward so far were pitched low.

Northern Rock shares tumbled over 20 percent to a new low on Monday after the bank said interest from potential suitors valued it at materially below Friday's share price.

The government had previously said bidders should not assume a loan arrangement with the Bank of England would be available beyond a sale, or its expiry in February.

However the finance ministry said in a statement on Monday that it was willing to discuss any proposals made, including one that envisages an ongoing role for the authorities.

Northern Rock was forced to go to the Bank of England for emergency loans two months ago, as the global squeeze on credit markets caused the mortgage lender's funding strategy to collapse.

None of the parties involved have disclosed how much money it has borrowed so far, but informed estimates, based on Bank of England data, put it at about 25 billion pounds ($51 billion).

The finance ministry said funds provided so far to Northern Rock would have to be approved by the European Union and that any bid for the bank would be at risk if it required more state aid, as this could get blocked by the EU.

All other things being equal, any proposal will be viewed favorably in so far as it is not conditional upon European Commission approval of further aid measures, it said.

NOT MUCH LIGHT

Northern Rock's advisers set a deadline of last Friday for expressions of interest and the bank said on Monday it had received interest covering a range of options and expected to receive further expressions of interest in the next few days.

It had received two types of proposal -- to invest in the company, including through an injection of assets as well as new capital, and to acquire parts of the firm's business or assets.

One of the bids came from a group led by British entrepreneur Richard Branson's Virgin Group, while another proposal has been lodged by former Abbey National chief Luqman Arnold to stabilize the bank and restore its finances.

It's tricky to see where the value is going to come from until you get a clearer idea of how people are going to replace the Bank of England funding, one analyst said. While there's not too much light at the end of the tunnel it looks like making funding extremely difficult.

Opposition politicians have criticized the government's and finance minister Alistair Darling's handling of the crisis, and said the latest statement gave no clue as to how much taxpayer money was at risk.

If it turns out to be the case that the taxpayer is seriously out of pocket, that we have an expensive bill for this fiasco, then I think his (Darling's) position will become incredibly difficult, Conservative Treasury spokesman George Osborne told BBC radio.

By 4:30 a.m. EST Northern Rock shares were down 22 percent at 103.4 pence, down from Friday's close of 132.6p, and valuing the bank at about 440 million pounds.

Northern Rock's shares have dropped over 80 percent since it went to the Bank of England for emergency funding in mid-September, and are down over 90 percent this year.

(Additional reporting by Kate Kelland; Editing by Quentin Bryar)

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