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Resolution said in a statement: "The entrenched position of the board of Bradford & Bingley has prevented the constructive engagement necessary to finalise this proposal.

"Given this, Resolution believes it cannot responsibly continue to recommend this proposal to Bradford & Bingley's investors."

Entrepreneur Clive Cowdery's investment vehicle Resolution had asked Bradford & Bingley's board for access to the lender's books in order to carry out due diligence on its proposed cash injection.

However, the board had come under increased scrutiny and pressure from the market after rejecting the request earlier this week. It attributed the decision to the additional uncertainty and delay the proposal would create.

Had Resolution's proposal been successful, it would have usurped Texas Pacific Group's (TPG's) plans to take a 23 per cent stake in Bradford & Bingley for £167m.