By Steve Slater and Sumeet Desai

"To pretend that somehow there was some other solution, unnamed, unspecified -- it seems to me to be clutching at straws. You needed to take decisive action. That's what we've done," finance minister Alistair Darling said on BBC Radio.

The FTSE 100 index of leading shares was down 2.3 percent at 5:30 a.m. EDT on continued nervousness about the UK banking sector.

The opposition Conservative Party branded the move as another example of government failure. But recent opinion polls show Prime Minister Gordon Brown's jibe last week that it was no time for a novice to be in charge may be starting to stick.

After months of polls showing Labour on course for a humiliating defeat at the next election, due by mid-2010, four polls in the last week have shown a bounce for Brown, finance minister for a decade, as the market crisis has worsened.

A Sunday Telegraph poll even put Brown and Darling ahead when people were asked who they trusted to run the economy after this month's government-brokered rescue of the country's biggest mortgage lender HBOS and laws curbing stock market speculation.

The Conservatives, however, remain comfortably ahead overall despite their poll lead of some 20 points having halved.

GOVERNMENT SHIFTS RISK

B&B, with its heavy exposure to Britain's slumping housing market, is one of the latest victims of a global banking crisis that has felled some of the world's largest financial institutions in the last few weeks.

Benelux financial group Fortis also underwent a part-nationalization on Sunday. In the United States, the administration is putting together a $700 billion bailout package to buy up banks' toxic assets to prevent more failures.

Santander is paying some 400 million pounds for B&B's 200 branches and deposit portfolio while the government will take over the mortgage assets.

While the public takeover puts even more risky assets on to the government balance sheet only seven months after the nationalization of Northern Rock bank, which had the same funding model as B&B, Darling said the risk would be borne by the banking industry.

The Treasury said the Financial Services Compensation Scheme, which is paid for by the banks, was triggered on Saturday after B&B was found to be no longer able to meet its funding obligations.

The scheme had to pay out 14 billion pounds to enable B&B's retail deposits be transferred to Abbey Santander and the Treasury has fronted that money. But it will have to be repaid by banks if B&B's remaining assets fall short.

"Through the statutory compensation scheme, if there's a shortfall then they meet that liability so the taxpayer interest as well as security for savers as well as the wider need to maintain financial stability is being looked after, "Darling said.

(Additional reporting by Matt Falloon, Kate Kelland and Myles Nelligan; writing by Sumeet Desai; editing by Paul Bolding and Sue Thomas)