The FSA is involved in secret talks to engineer a takeover of Bradford & Bingley as it seeks a permanent solution to secure the future of the embattled buy-to-let mortgage lender.

In the wake of a tumultuous week in global equity and credit markets which saw HBOS, Britain’s biggest home-loan provider, agree an emergency sale to Lloyds TSB, the FSA is understood to have been in contact with Santander, the Spanish banking group that owns Abbey and has just bought Alliance & Leicester, ING, the Dutch banking group, and National Australia Bank, which owns the Yorkshire and Clydesdale banks, to gauge their interest in a takeover of B&B.

The FSA’s conversations with prospective buyers of B&B will be viewed as a positive move by the City because of concerns about the long-term viability of financial institutions that rely on wholesale funding amid a liquidity squeeze such as the one that has gripped markets worldwide. The FSA declined to comment last night.

Bradford & Bingley yesterday claimed it was confident that it could remain independent despite its vulnerabilities in the current financial climate.

Sunday Telegraph, Financial Times, The Times, The Independent