Bradford & Bingley (B&B) is to divide its £50 billion balance sheet into “good” and “bad” assets in an exercise that echoes similar plans at Northern Rock. B&B, which was broken up and partly nationalised a year ago, is looking for attractive assets that it can sell to private buyers.

The plan is part of B&B’s drive to repay its loan as quickly as possible. B&B was closed to new business last September and its mortgage book nationalised with an £18.4 billion loan from the Financial Services Compensation Scheme (FSCS). Santander of Spain bought its £20 billion deposits book.

The Government paid the FSCS fee but the financial services industry must cover the sum over time. B&B has been told it must repay the sum as quickly as possible. It must also wean itself off the working capital that it receives from the Government, which currently stands at £8.5 billion. The money is being partly recouped when B&B customers repay their mortgages.

But the bank is also looking at ways to speed up the repayment. That could include selling books of business. Richard Banks, B&B’s managing director, said: “It is our objective to create value for the taxpayer.”

B&B has one of the highest bad-debt ratios among the big banks because of its focus on buy-to-let lending. But its management is seeking to split off mortgages that are performing or are low risk because they have a low loan-to-value ratio, which would be attractive to a buyer.

B&B is also trying to reinvent itself as a servicing business that could take on work from other banks. As part of its plan to wind down its business, it is becoming increasingly expert in finding efficiencies, Mr Banks said, which it could use to manage books for other banks. There are no plans for B&B to start lending again. That is in contrast to Northern Rock, which is intended by the Treasury to become a leading force in mortgage lending again.

The Treasury’s plan for the bank to be split into two is under consideration by the European Commission and may be given the green light next week when the Commission holds its final session before its five-year term expires.

Neelie Kroes, the European Competition Commissioner, could impose restrictions on Northern Rock’s ability to write new savings and loan business because of the state aid it has received.

The Treasury also plans to split Northern Rock into a good and bad bank so that the good part could be sold to a private buyer. Sir Richard Branson’s Virgin group, Tesco and private equity houses may be interested.

Virgin’s ambitions were underlined last week when it emerged that Virgin Money is seeking a banking licence as it gears up to buy bank assets that may be sold over the next year. The Virgin team, led by Jayne-Anne Gadhia, formerly with Royal Bank of Scotland, was near victory in February last year when the Government scrapped the sale and nationalised the lender.

In its statement the commission is also expected to deal with RBS’s role in the Asset Protection Scheme. The bank hopes to withdraw as much as £50 billion of assets from the scheme.

Ms Kroes has had her term of office extended to enable her to continue in her central role in deciding the future of Britain’s banking industry. She was due to step down next Saturday but is to continue in a caretaker role until the end of the year. In this period she will be able to make decisions on ongoing cases but not launch new policies.

She has been in talks with RBS, Lloyds and their advisers over state aid for six months and has made clear she would like a second five-year term.

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