The prospect that a second British bank could be nationalised has intensified as regulators and politicians continued talks yesterday over the future of troubled lender Bradford and Bingley.

B&B shares tumbled to a record low on Friday and the cost of insuring its debt jumped, prompting regulators to step up efforts to find potential white knights for the bank.

The Financial Services Authority and Treasury officials were meeting over the weekend to discuss rescue options, two people familiar with the matter said.

A Treasury source said: "There are contingency plans. We are in close discussions with the FSA and the Bank of England. A decision hasn't been taken."

Major banks were last week sounded out about rescuing the lender, but none were keen to take on its lending book at a time of weakening house prices, industry sources have said.

One option now is to arrange a 'lifeboat rescue', where all the major lenders would take a share of B&B's mortgage book to help shore up confidence in the financial system.

Britain's top five banks - HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS - and Abbey's Spanish owner Santander already own about 30 per cent of B&B between them after they stepped in to help save a rights issue that flopped in June.

But a reluctance among rivals for a rescue deal has increased the prospect the lender could be nationalised and merged with Northern Rock, the bank that was taken over in February after the government failed to find a rescuer.

Yesterday's Daily Telegraph, quoting unnamed sources, said B&B would have to be nationalised in the coming days. Finance minister Alistair Darling is expected to be closely involved in the talks.