EU clears Bradford & Bingley rescue

"The measures described can be authorized as rescue aid in line with the EU guidelines on state aid for rescuing and restructuring or liquidating firms in difficulty," the European Commission said in a statement.

The British government on Monday said it was taking over Bradford & Bingley's 50 billion pound ($89 billion / euro62.22 billion)) mortgage and loan books as turmoil from the U.S. credit crisis spread across Europe.

Prime Minister Gordon Brown said the move was needed to stabilize the financial system.

EU regulators need to approve government aid to companies and the Commission moved fast to clear the deal.

The British government also paid out 18 billion pounds ($32 billion / euro22.37 billion) to facilitate the sale of Bradford & Bingley's savings business, including its entire retail branch network, to Spain's Banco Santander.

Santander, the second largest bank in Europe, said it will be paying 612 million pounds ($1.01 billion (euro710 million) for Bradford & Bingley's 197 branches and 20 billion pounds ($35.6 billion / euro24.89 billion) of deposits.

Bradford & Bingley was the third major British bank to run into trouble since credit crunch began just over a year ago. Northern Rock PLC was nationalized in February, and HBOS PLC sold itself to Lloyds TSB Group PLC on Sept. 18, to stem a sharply falling share price.

The EU said the state funding to enable the sale of Bradford & Bingley's deposit book and the working capital and guarantee arrangements represented state aid, but it could be permitted under EU rules allowing for urgent structural measures.

The regulators found that Santander had not received any state aid as it had paid the market price for Bradford & Bingley's retail deposit business.