EU says received Northern Rock plan from UK govt

BRUSSELS, March 18 (Reuters) - The European Commission said on Tuesday it had received the British government's plan for troubled mortgage lender Northern Rock in order to check whether it complies with European Union state aid rules.

"We have received it yesterday," an EU official said, declining to give further details.

Northern Rock aims to repay billions of pounds to the British government.

Under the plan, Northern Rock will scale back mortgage lending and try to attract new retail savings while at the same time remaining attractive for a future buyer.

Details of the plan are expected to be announced this week.

EU rules allow public support in some circumstances to prevent companies from going bust, but state aid that distorts competition is prohibited.

Banks in Denmark, Northern Rock's only foreign market, have complained to the European Commission's competition authorities that the bank is using government guarantees for its deposits to gain an edge over competitors at a time of financial turbulence.

In a letter sent to Brussels and obtained by Reuters, the Danish lenders complained of a "highly problematic" situation.

Northern Rock offers Internet-based savings accounts in Denmark at interest rates of as much as 5 percent. The local industry body said that, combined with the government guarantees underpinning the bank's deposits, created an unfair advantage.

Britain's banking industry has also expressed concern over the possible impact of the savings push by Northern Rock on the already highly competitive domestic market.

Banks last month said the government had pledged Northern Rock would not be allowed to distort the market for savings and banking products.

"I think many people in the industry share our concern," Danish Bankers' Association head Jorgen Horwitz told Reuters. (Reporting by William Schomberg in Brussels and Peter Levring in Copenhagen; Editing by Dale Hudson)