Bradford & Bingley savings business sold to Spanish bank Santander
Struggling mortgage lender Bradford & Bingley is to be nationalised, but its savings business is being sold to Spanish bank Santander in a deal worth £612m.
Shares were today suspended ahead of the nationalisation of the struggling mortgage lender.
The Financial Services Authority (FSA) decided on Saturday morning that B&B was not strong enough to continue as a deposit-taking business after the recent financial turmoil undermined confidence in the bank.
Chancellor Alistair Darling said: "My priority was to protect savers and depositors but also to ensure we got a good deal for the taxpayer."
Mr Darling said the Government had taken "quick, decisive action" to maintain economic stability and promised that the taxpayer would be protected.
The lender's £41.3 billion mortgage book is set to be added to the national debt just months after Northern Rock was also taken into public ownership.
My priority was to protect savers and depositors but also to ensure we got a good deal for the taxpayer
B&B's savings and branch business - which has £22.2 billion in customer deposits - will be bought by Santander, the Spanish bank which owns Abbey and has agreed to buy Alliance & Leicester.
Anto Horta-Oso, Abbey's chief executive, said: "This is good news for Bradford & Bingley's savings customers. They can be certain that their hard-earned savings are with a bank they can trust."
Lloyds TSB is also believed to have tabled a bid for the B&B assets, eyeing the deposit book as a means to bolster its deposit base and reduce its reliance on expensive wholesale funding.
B&B's branches will remain open this morning as usual with call centres and internet banking also available, the Treasury said.
Gordon Brown today vowed to do "whatever it takes" to ensure the stability of the financial system after the Government intervened for the second time in a year to rescue a struggling bank.
"We will do whatever it takes to ensure the stability of the British financial system," he said.
"That is why we have taken action to take Bradford & Bingley into public ownership."
The break-up will mark a dramatic end to a business which can trace its roots back more than 150 years.
"The Government, on the advice of the FSA and the Bank of England, acted immediately to maintain financial stability and protect depositors, while minimising the exposure to taxpayers," the Treasury said.
"For savers and borrowers of Bradford & Bingley it will be business as usual," it added. Before B&B became a bank in 2000, it was one of the UK's best-known building societies.
B&B has been squeezed by the credit crunch hiking its funding costs, and the housing market slowdown casting doubt over its main buy-to-let business.
The firm has seen bad debts and arrears soar, lost millions on complex mortgage-backed investments hit by the turmoil, and its investment status downgraded by ratings agencies - making it more expensive for the group to do business.
The lender has also taken an £18 million hit from organised fraudsters hitting the wider buy-to-let sector by gaining bigger mortgages than properties are worth.