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The government has announced that it is extending a guarantee to protect the savings of Northern Rock customers.

News that the Treasury has decided to protect new savings deposited with the beleaguered lender marks a reversal of its previous policy.

Originally ministers pledged to protect existing accounts held with Northern Rock, but the Treasury today confirmed that it would guarantee new deposits made after September 19th.

The government said the revised conditions had been put in place at the request of Northern Rock and would allow the bank to "pursue the full range of its strategic options".

Northern Rock previously announced that it was in "preliminary discussions with selected parties" over its future.

Many analysts have suggested that Northern Rock has no future in its existing form, with the company's brand name having been damaged by last month's high-profile run on the bank.

Savers rushed to withdraw their cash from Northern Rock after the lender revealed that it had asked the Bank of England to provide it with an emergency loan in the wake of an ongoing global credit crunch.

The government subsequently made the decision to protect existing deposits held with Northern Rock in order to put an end to the run.

Remarking on the government's decision to extend the guarantee to new deposits, Northern Rock confirmed that the arrangements would "remain in place during the current instability in the financial markets".

"Northern Rock will pay an appropriate fee for the extension of the guarantee to ensure that it does not receive a commercial advantage," the bank stressed.

"Accordingly, all retail savings - for both existing and new depositors – remain guaranteed, safe and secure."

Northern Rock added that it was continuing discussions with "selected parties" over its future.

Reports at the weekend suggested that the US investment banks Citigroup and Merrill Lynch were trying to put together a package of £10 billion of loans for Northern Rock, in order to fend off any takeover approaches.

Meanwhile the chief executive and chairman of the Financial Services Authority (FSA) have appeared before MPs today to explain the regulator's role in the Northern Rock crisis.

Members of the Treasury select committee previously questioned Bank of England governor Mervyn King about his part in failing to prevent the first run on a British bank in 150 years.