Officials from the Treasury and the Financial Services Authority (FSA) have been in talks with executives from the bank in a bid to secure its future.

BBC News business editor Robert Peston says the Treasury will then speedily sell B&B’s 200 branches and its savings business to a bank or number of banks.

But the British Bankers Association is unhappy at some aspects of the plan.

‘Difficult choices’

Association chief executive Angela Knight told BBC Five Live she was not happy the taxpayer was having to take on the liability of B&B as well as Northern Rock.

She said: “I’m not comfortable with that, I don’t know anybody who is comfortable with that. There’s a series of difficult choices here.

“The financial services industry underpins, not just the UK economy, but indeed all of us individually, and there can be times where authorities have to step in.”

She added that it was a “very great shame that it’s got to this place”.

But our business editor said that B&B was getting “perilously close to a funding crisis… there had to be a solution”.

Loans nationalised

B&B’s share price has plummeted and it has announced plans to cut 370 jobs due to a downturn in the mortgage market.

“Why don’t they have the sense to nationalise the things that matter – Water, Electricity, Gas, Railways etc, etc” Colin, Plymouth, UK

The bank will be nationalised using special legislation the Treasury put through when it took Northern Rock into public ownership earlier this year.

The measure is expected be announced on Sunday night or Monday morning.

The Treasury and FSA will negotiate with banks interested in buying parts of B&B. Possible buyers included Santander of Spain, HSBC and Barclays.

Santander, which already owns Abbey and Alliance & Leicester, has been looking at B&B for some time.

“The nationalisation and break up of Bradford & Bingley will represent a momentous event in the history of British banking” Robert Peston

B&B’s £50bn of loans, including £41bn of home mortgages, will not be sold and will be nationalised on a long-term basis. The mortgages may be given to the nationalised Northern Rock to manage.

The bank experienced significant withdrawals of cash from its branches and online bank on Saturday amid customer concerns about its situation.

‘Less vulnerable’

The Treasury’s decision to sell B&B’s savings business means depositors and savers’ money should be safe.

“In terms of UK banking problems, the nationalisation of Bradford and Bingley should be the last of the banking accidents here,” our business correspondent said.

He said there was a class of bank that had relied heavily on the mortgage market – Northern Rock, HBOS, and B&B – and which had now either been nationalised or taken over.

“The remaining banks have much broader bases, they are less vulnerable,” he added.

However, B&B’s shareholders and holders of its subordinated debt may lose out.

Our business editor says the nationalisation and break-up of B&B represents a momentous event in the history of British banking.

“We can assure customers that their deposits are safe with Bradford & Bingley” Tony McGarahan Bradford & Bingley spokesman

He said: “It will mean that every building society that floated on the stock market in the wave of demutualisations of the past two decades will either have collapsed or been sold to a conventional bank.”

B&B was close to seeing a demand from depositors for the return of billions of pounds, which it would have been unable to find.

Credit rating agencies had been downgrading the rating of its covered bonds, a form of funding which involves packaging up mortgages for sale to investors.

Liberal Democrat treasury spokesman Vince Cable said: “There doesn’t seem to have been a white knight in the offing. The alternative otherwise was just to let the thing go bust and protect the depositors”.

Bradford & Bingley spokesman Tony McGarahan said discussions were taking place and an announcement would be made before the stock market opened on Monday.

“We can assure customers that their deposits are safe with Bradford & Bingley,” he said.

News reported by The BBC