Traders who insured investors against a default by Bradford & Bingley, the UK mortgage lender, will have to pay out after the government’s refusal to meet the interest of the nationalised bank’s debt triggered a “credit event”.

The International Swaps and Derivatives Association on Thursday ruled that a credit default had occurred after B&B said it would not pay coupons on £325m ($534m) of tier two bonds, due last month.