Troubled bank Bradford & Bingley, which has seen its share price crash, is to be nationalised, the BBC has learned.

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

UK mortgage lending by the major banks fell to a record low in August, with approvals for house purchases 64% lower than a year ago.

The British Bankers’ Association (BBA) said that 21,086 mortgages had been approved for house purchases, down from 58,564 in August last year.

The BBA said that falling property prices and the state of the economy would continue to have an impact.

Consumer credit rose by £0.4bn in August, according to the BBA.

“Falling property prices, economic pressures on households, tighter lending criteria and anticipation of the government’s announcement on stamp duty all suppressed or delayed demand in August and will continue having an impact in the months ahead,” said BBA statistics director David Dooks.

Housing slowdown

The number of mortgage approvals for house purchases fell from 22,239 in July to the lowest figure since the figures began being collected in September 1997.

“The BBA data graphically highlights that housing market activity continues to be throttled by stretched affordability and tight lending conditions” Howard Archer, Global Insight

Approvals for remortgaging in August were 28% lower than last year, at 47,765. This was the lowest level since early 2001, the BBA said.

In total, net mortgage lending rose by £2.1bn in August, less than half of the average rise over the previous six months.

The BBA’s members account for about two-thirds of mortgage lending and the figures reflect the sharp slowdown in the housing market.

Mr Dooks said that speculation about a decision on stamp duty had flattened demand in August.

In the first week of September, Chancellor Alistair Darling announced a year’s suspension of stamp duty on properties costing up to £175,000.

Howard Archer, chief UK economist at Global Insight, said that the problems buyers were having in trying to obtain a mortgage continued to be an issue.

“The BBA data graphically highlights that housing market activity continues to be throttled by stretched affordability and tight lending conditions,” he said.

Research by financial information service Moneyfacts showed that the availability of mortgages for those only able to offer a relatively small deposit had slumped.

It said that this time last year, 74% of mortgages had been available for borrowers with a deposit of 10% or less, but this had now dropped to 29%.

“Competition was one of the major factors when setting mortgages rates and best buys were awash with deals at 95% loan-to-value. Today the overriding factor when setting mortgage rates is risk,” said Darren Cook, of Moneyfacts.

“Lenders are focusing much more on risk. They are making less products available to borrowers with a small deposit and making the few that are available much more expensive.”

Credit cards

Families were repaying as much as they spent on credit cards, said Mr Dooks of the BBA, signalling that people were exercising caution during the squeeze on household finances.

Annual growth in credit card borrowing rose to 8.2% in August, but borrowing on overdrafts fell slightly and borrowing on unsecured loans remained subdued.

Personal deposits and savings had remained low in August, rising by £0.3bn following a small fall in July, the BBA said.

The increasing pressure on household finances, caused in part by higher food and fuel bills, has led to a pattern of weaker savings in recent months.

News reported by The BBC