B&B nationalisation confirmed

But B&B's savings and branch business - which has £20 billion in deposits and 2.7 million customers - will be bought for £612 million by Santander, the Spanish bank which owns Abbey and has agreed to buy Alliance & Leicester.

B&B's branches are open as usual with call centres and internet banking also available, the Treasury said. The break-up will mark a dramatic end to a business which can trace its roots back more than 150 years.

Chancellor Alistair Darling said the Government had taken "quick, decisive action" to provide economic stability and he promised that the taxpayer would be protected.

He told GMTV: "My priority was to protect savers and depositors but also to ensure we got a good deal for the taxpayer. We had to stabilise the situation in order to protect the banking system as a whole, just as we have done on previous occasions."

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.

"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. It has around 3,000 staff and 197 branches, and was the last former building society to retain its independence after the nationalisation of Northern Rock in February and July's announced takeover of Alliance & Leicester.

The combined business of Abbey, Alliance & Leicester and B&B will have 1,286 branches across the UK, giving Santander a 10% share of the retail savings market.

The Financial Services Compensation Scheme has paid out £14 billion - a loan funded by the Bank of England - to allow B&B's retail deposits to be transferred to Abbey, with a further £4 billion to be paid by the Treasury to cover those deposits not protected by the scheme. B&B's shares have been cancelled, with compensation to be paid in "due course", the Government said.