The deal, secured by the Treasury and Financial Services Authority last night, will see the Treasury take control of the remaining mortgage and personal loan books, wholesale liabilities and the relevant staff and headquarters.
Abbey will take over depositor and saver accounts and B&B retail branches.
The Financial Services Compensation Scheme has paid out around 14bn to ensure the protection of B&B’s retail deposits.
It has paid Abbey 4bn to ensure the safety of the remaining deposits not covered by the FSCS.
The Bank of England has been called in to fund the transfer by the FSCS which will be paid for by the wind up of B&B.
A release says the move was triggered by poor investor and lender confidence, likely sparked by growing speculation around the longevity of the business.
B&B owns Mortgage Express, the nation’s largest buy-to-let lender, and will no longer offer new mortgage products.
Last week it announced it would slash 370 jobs connected to mortgage processing and begin a review of head office and central staff.
Alistair Darling, chancellor of the exchequer, says: “The first way of redeeming the costs that we are incurring comes from redeeming the assets of B&B.
“If that isn’t enough, then there will be a claim under the compensation scheme. What I am making absolutely clear today, is that I have no intention of collecting that money in the immediate future.”