Bank customers and shareholders, as well as taxpayers, will have to pay for the Bradford & Bingley nationalisation for years to come.

The Financial Services Compensation Scheme (FSCS) is gearing up for a massive increase in the levy it charges all banks after borrowing £14 billion from the Goverment today to pay to Banco Santander to take on the B&B deposits.

Analysts said the extra levies of hundreds of millions of pounds a year initially, and possible billions later, would either lead to increased bank charges or reduced bank dividends or both.

The FSCS has agreed to repay the Government a first tranche of £450 million next September. There is no money in the kitty beyond £5 million raised in the levy this year.

Loretta Minghella, chief executive of the FSCS, confirmed today that she would be calling on the British banks to contribute. However, she would only be levying for interest on the £14 billion for the first three years. A "sensible repayment schedule" for the principal would be agreed with the Government in three years.

She expected that the amount owing would be reduced over time by the recovery of funds from the sale or run-off of B&B assets now in government hands.

"This package ensures depositors' savings are safe," said Ms Minghella.

"The money we are contributing reflects the Financial Services Authority's estimates of what we would have had to pay out if we had to pay compensation in the usual way," she added. The FSCS guarantees the first £35,000 of any UK deposit.

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