Bradford & Bingley is being nationalised. Haven’t we been here before?

Yes, in February Northern Rock was taken into public ownership after it was brought to the point of collapse and no private buyer came forward. The Government argued then that it had no choice but to take control of the bank, which otherwise would have been forced into administration.

Is it the same this time around?

Not quite. Northern Rock and B&B are suffering from different problems. For the Rock, the money markets refused to lend it money, so it ran into difficulties funding its lending activities. B&B has plenty of capital, enough to tide it over well into next year. The problem for B&B has been one of confidence. It was highly exposed to the buy-to-let market. Its shares have also fallen by more than 93 per cent in the past 12 months, meaning that the City no longer believed that it could retain its independence.

Why has it come to a head now?

Banks desperately need strong credit ratings so that they can borrow cheaply. B&B’s rating has been downgraded so heavily that it is now just one notch above “junk” – falling to this level would make borrowing very expensive. Last week B&B struck a deal with Barclays where it effectively borrowed the bank’s credit quality. It axed 370 staff in its mortgage business, which meant that it had more or less given up any prospect of bringing in new business. Confidence, and the share price, are so low that the Government was seriously worried that there would be another run on a savings and lending institution.

If HBOS was sold to Lloyds TSB, why has no one bought B&B lock, stock and barrel?

Frankly, no one wanted to buy B&B because of the perceived risks of taking on its £41 billion mortgage book. Banco Santander, the Spanish bank that owns Abbey, last night took on the retail deposits and branches of B&B. ING of the Netherlands and National Australia Bank, which owns the Clydesdale and Yorkshire Bank, were also sounded out by the Financial Services Authority, the regulator.

So the taxpayer has to foot the bill again?

Not all of it. Banks did not want to buy all of B&B, but parts of it were attractive. The Government will take control of the mortgages – which it will probably pass on to Northern Rock to manage. The savings book, about £20 billion, has been sold straightaway to Santander.

I am a saver with B&B. Should I worry?

Almost certainly not. The Financial Services Compensation Scheme means that your savings are guaranteed up to £35,000. The Government is increasing the threshold to £50,000, but the change hasn’t come into effect yet. It is likely that you have already read this figure several times before and, if you have substantial assets, then you will have spread them across several savers. If you haven’t yet, then you should at least consider it.

I have a mortgage with B&B. Is it safe?

Whether the Government, or later a private buyer, is in control of B&B’s mortgage book, you should be fine. Whatever happens, your existing mortgage contract will continue as normal until it expires. After that, it is possible (as Northern Rock has done) that you will be guided to another lender if the bank’s owner wants to scale back its mortgage lending operations. The Government has formally underwritten every Rock mortgage. It is hard to imagine it doing anything other than the same for B&B.

What about shares in B&B?

Nationalisation will mean that your shares are worthless and you will not have the right to vote for or against it. If B&B remains in government hands, you will probably be offered some compensation for your loss. How much you actually get is anybody’s guess, though. In the case of the Rock, an independent valuer has been appointed to set a level, but a lengthy battle in the courts is likely because some City shareholders believe they will be fleeced. It is possible that you will be offered a stake in the new owner when it emerges.

B&B was big in buy-to-let lending. Does this mean the end for that market?

Not necessarily. B&B has said all along that it is convinced of the merits of the buy-to-let model, which is riskier but also more profitable. The worry was more that it was over-reliant on the market. Three quarters of its mortgage loans were made up of buy-to-let loans for investment properties or were self-certified by the borrower. Its own customer default rates and bad repayment troubles were recently double their historical average.

I can’t believe all this financial carnage. Will it happen again?

You can never say never, but B&B was the last remaining independent mortgage lender, so if something does happen it is unlikely to be so dramatic. Alliance & Leicester has been sold to Banco Santander; HBOS has been taken over by Lloyds TSB; and now B&B and Northern Rock have both been nationalised. Some analysts are worried that banks such as RBS and Barclays, which have had to raise money from their existing investors or third parties, might have to do so again. But no one has suggested that there is a real risk of one of these financial giants collapsing.

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