Bradford & Bingley is to be nationalised, the government has confirmed.
Under the arrangement, the government will take control of the bank's Ј50bn in mortgages and loans.
Shares in the company have been suspended.
B&B's Ј20bn savings business and branch network will be bought by rival Abbey, which is in turn owned by Spanish banking group Santander.
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"Following recent turbulence in global financial markets, Bradford & Bingley has found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution," said the Treasury.
It added that the move would protect savers' money and that B&B's branches, call centres and internet operations would "be open for business as usual to provide continuity of service to customers".
BBC business editor Robert Peston said it was a good deal for taxpayers, and that the risk was "quite close to nil".
(BBC)
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