Britain nationalises ailing Bradford & Bingley

LEAGALISING B&B: This because B&B, Britain's eight-biggest mortgage lender, could be targeted.

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London: The British government intervened on Monday to save major mortgage lender Bradford & Bingley (B&B) by taking it into public ownership and selling off its savings and deposits business.

"We have taken quick and decisive action to stabilise the banking system," Alistair Darling, the Chancellor of the Exchequer, said on Monday.

By hammering out a deal for B&B in cooperation with the financial watchdog, the Financial Services Authority (FSA), the government had taken a "clear role" in making sure that stability was provided, deposits were safe and the business could continue trading, said Darling.

The move came amid fears that B&B, Britain's eight-biggest mortgage lender, could be targeted by angry depositors and borrowers in a repetition of the run on Northern Rock a year ago.

The government said that Spanish banking giant Santander is to take over the savings and deposits business of B&B, worth 20 billion pounds ($36.4 billion), a statement said.

This will be done via Abbey National, the leading British bank acquired by Santander earlier this year, which will also take over the 3,000 branches of B&B and its 2.6 million savers.

However, B&B's volatile loans and mortgage business, worth an estimated 50 billion pounds, will be transferred into temporary public ownership.

B&B was the main lender in the so-called buy-to-let market, where investors speculated on rising house prices. B&B's share price received a hammering on the London stock market in the wake of the recent increasing turmoil in the international banking system.

Under the deal agreed between the government and the FSA over the weekend, banks will be liable for the financial risk taken on with the nationalisation.

However, the government will extend a loan of 20 billion pounds to banks to bridge the "risk gap" for the banks under a FSA compensation and insurance scheme.

The government says there will no burden to the taxpayer from the nationalisation.

In January, the government placed Northern Rock, Britain's biggest mortgage lender, into temporary public ownership when a private buyer could not be found.

Last month, HBOS, Britain's fifth-biggest bank and mortgage lender, was taken over by Lloyds TSB in a rescue deal backed by the government.