Northern Rock's share price has never recovered since it was forced to request emergency funding from the Bank of England in September when thousands of account holders flocked to take their money out of the mortgage lender.

Northern Rock shares were suspended at 90 pence, giving the bank a market capitalisation of 379 million pounds (S$1.04 billion).

In contrast, at the same stage of 2007, the bank was worth around 5.3 billion pounds.

'The board of Northern Rock notes the government's announcement of its intention to take the company into temporary public ownership by legislation under which it will acquire all of the shares in the company,' the bank said in a statement to the London Stock Exchange.

'The government expects temporary public ownership to become effective within the next few days.'

The British government revealed on Sunday that it would introduce emergency legislation on Monday to nationalise Northern Rock.

Finance minister Alistair Darling said the government had rejected two private bids for the bank, from Richard Branson's Virgin Group and Northern Rock's own management team, because they did not deliver value.

Commercial banks have tightened up their lending criteria in the wake of a credit squeeze which has severely shaken world financial markets since August 2007.

Investors and banks alike remain uneasy about the exposure of commercial financial institutions to the subprime housing crisis in the United States.

Subprime mortgages were doled out to Americans with poor credit histories.

However, higher repayment costs are now causing rising defaults, forcing investors to reassess their exposure to riskier assets such as mortgage-backed securities.

Northern Rock, based in the north-east city of Newcastle, is Britain's worst victim of the squeeze on global credit.

It has since borrowed an estimated 26 billion pounds (S$71.9 billion) from the British central bank, although media reports have put the actual liability to taxpayers at 55 billion pounds or higher.

Last week, Germany's Commerzbank and Swiss giant UBS joined the ranks of financial institutions posting significant losses linked to the troubled US subprime market.

The meltdown in the US subprime real-estate market has meanwhile led to a global loss of 7.7 trillion dollars in stock-market value since October, a recent report by Bank of America showed.

British banks Barclays and Lloyds TSB release their 2007 results on Tuesday and Friday respectively and both are expected to outline their subprime-related losses. -- AFP