LONDON - BRITAIN is set to nationalise troubled bank Bradford & Bingley on Monday after Spanish bank Santander agreed to buy its retail deposits and branch network.

B&B would be the second British bank nationalised this year and the latest in a string of high-profile banks in Europe and the United States to fall victim to the global credit crunch.

Santander will pay about £400 million (S$1.05 billion) to acquire 2.7 million Bradford & Bingley customer savings accounts containing some £21 billion of deposits, a company spokesman said.

It will also take over the mortgage lender's network of around 200 branches, the spokesman said.

The B&B brand will remain for now but the accounts will transfer to Abbey, a British bank bought by Santander in 2004.

Finance minister Alistair Darling is expected to announce plans early on Monday to nationalise the remainder of Bradford & Bingley, people familiar with the matter said.

The Treasury led intense talks on the rescue of Britain's 9th biggest mortgage provider over the weekend.

The government would have preferred a private-sector buyer to acquire all of B&B, but rivals appeared unwilling to take on B&B's £41 billion residential mortgage portfolio amid the global credit crisis and weakening British housing market.

B&B shares tumbled to a record low on Friday and closed at 20 pence, valuing the company at less than £300 million.

This month, the British government brokered the takeover of HBOS, Britain's biggest home lender, by rival Lloyds TSB.

The financial crisis and Britain's weakening economy have heaped pressure on Prime Minister Gordon Brown, whose party lags the opposition Conservatives in opinion polls and whose leadership has been questioned by some in his own party.

Analysts say the nationalisation or takeover of lenders may lessen the availability of mortgages and exacerbate a downturn in Britain's once red-hot housing market.

The European banking sector felt the fallout of the credit crisis as Benelux financial group Fortis underwent a shotgun nationalisation on Sunday.

This followed emergency talks with European Central Bank President Jean-Claude Trichet to prevent US-style financial contagion engulfing one of Europe's top 20 banks.

The B&B deal further builds Santander's influence in the British banking market after it agreed to buy another mortgage lender, Alliance & Leicester, in July.

The Treasury said on Sunday its priority was to protect savers and provide financial stability to the British banking system.

The Association of British Insurers urged the government to maximise value from the run-down of B&B for shareholders and bondholders and said it should not be inevitable that all shareholder value is wiped out by nationalisation.

The UK Shareholders Association, representing private shareholders, said it opposed B&B's nationalisation on the grounds there may be better alternatives to protect shareholders' interests. -- REUTERS