The Virgin consortium still leads the race for Northern Rock

The global credit crisis meant no bidder could raise the money needed to pay back the �25bn in government loans made to the bank, he told the BBC.

The Observer reported Northern Rock could decide as early as Monday whether to continue talks with suitor Olivant.

Olivant is now seen as the chief rival to preferred bidder Virgin Group.

Rival bids

The Olivant consortium, headed by former Abbey boss Luqman Arnold, outlined details of its intentions for Northern Rock on Friday.

It plans to immediately repay between �10bn and �15bn of taxpayer's money which has been used to prop up Northern Rock, reimbursing the remaining �10bn or so of public funding by 2009.

The Sunday Times reported that Olivant's rescue plan - which would involve it taking a 15% stake in Northern Rock and retaining its brand name - was now supported by investors holding 23% of the bank's shares.

They have got to stabilise the situation Vince Cable, Liberal Democrat leader

Northern Rock's board wants to spend the next month working with both Virgin and Olivant to refine their bids, the newspaper added, making it extremely unlikely that any outline deal would be reached by the Christmas deadline set by the government.

But critics of the process believe any bidder will find it difficult to raise the billions needed to repay the first tranche of government funding in the current financial climate.

"It is not going to work," Mr Cable told the BBC's Andrew Marr show.

"The amount of money being sunk in [Northern Rock] is absolutely staggering. There is no end to it."

Mr Cable repeated his call for the government to take temporary control of the bank's affairs but said he was not arguing for nationalisation for "ideological reasons".

"They [ministers] have got to stabilise the situation."

Gordon Brown said last week that "all options" were still being considered but that the government was trying to find a private buyer for the business.