The government has announced the nationalisation of the UK’s largest buy-to-let mortgage lender, Bradford & Bingley, with Spanish Bank Santander buying its branches.

Chancellor Alistair Darling said: “The Government, on the advice of the Financial Services Authority and the Bank of England, acted immediately to maintain financial stability and protect depositors, while minimising the exposure to taxpayers.”

Customers need not worry, as the Treasury says that customers money is safe, however, people owning shares in the bank will lose out.

Santander currently owns Abbey National and Alliance & Leicester, and the Spanish banking giant will take over B&B’s UK branch network and £21bn deposit book for £612m.

Santander, only recently bought over A&L, and will now acquire B&B’s depositor base of 2.7m customers and it 197 branches across the nation.

B&B’s customers can continue to use their existing methods of banking – in branch, phone and internet – for transactions, as usual. The mortgage lenders branding will also remain in place.

As part of the sale, recently appointed chief executive Richard Pym and finance director Chris Willford are expected to remain to transfer B&B’s deteriorating mortgage portfolio into taxpayer hands.

Lloyds, with new partner HBOS, is believed to have put forward a bid for B&B’s assets, viewing the deposit book as a means to bolster its deposit base and reduce its reliance on expensive wholesale funding. Both Santander and Lloyds bids were understood to have been low, in part because it believes that more B&B depositors are likely to withdraw their funds as the bank is carved up. Since June this year customers have already withdrawn about £1bn from B&B, when the bank held about £22bn.

Even though the performance of B&B this year has been poor; the collapse in its share price and the botched rights issue that needed to be overhauled twice, departing board members will be entitled to a pay off equivalent to their annual salary. The banks chairman Rod Kent was paid £265,000 last year, with other non-executive directors collectively earning almost £320,000.

Northern Rock’s chief executive, Adam Applegarth, left with more than £1.1m made up a pay-off of £765,000 and a £346,000 pension top-up.