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Alliance & Leicester, the bank that some say pre-empted the credit crunch when it stopped providing homeowner loans in July 2007, is set to be taken over by Spanish banking group Santander.

It is understood that once the terms and technicalities of the takeover have been completed Alliance & Leicester will merge with Abbey, already an important player in Santander’s investment porfolio.

It is not known whether the merger will result in any changes to Abbey’s provision of homeowner loans.

Emilio Botin, chairman of Santander, commented, “The transaction meets Santander's return on investment target as well as being accretive for Santander Shareholders. We are very pleased to be working with the management and employees of A&L as we seek to build with Abbey one of the leading franchises in the UK banking sector.”

It is likely that the acquisition will be welcomed by the Financial Services Authority, especially in the wake of last week’s news concerning Barclays’ decision to stop offering homeowner loans through its loans arm First Plus.