The UK Government is today poised to announce a rescue package worth in the region of £50bn for British banks.
They are set to agree the massive cash injection under a bold plan to resolve the crisis in credit markets and in return, the taxpayer will own a stake in the banks.
The Government came under increasing pressure to act after the Royal Bank of Scotland, which owns the Ulster Bank, became the latest institution to be heavily hit by the financial turmoil.
Shares in the once mighty RBS, owner of NatWest, and HBOS, the country's biggest mortgage lender, both fell to all-time lows of less than £1 yesterday.
Chancellor Alistair Darling said he would make a statement before financial markets opened this morning and address the House of Commons later today.
Prime Minister Gordon Brown earlier held talks with Bank of England Governor Mervyn King. Mr Darling and the chairman of the Financial Services Authority, Lord Turner, also took part in the discussions.
“The Bank of England has been putting substantial sums into the market today and it is ready to do more when that is needed,” the Chancellor said last night.
“We have been working closely with the Governor of the Bank of England, the Financial Services Authority and financial institutions to put banks on a longer term sound footing.”
As well as a cash boost to bolster depleted balance sheets, the rescue package is also expected to include access to a stand-by facility for the banks to ensure they have sufficient funds for day to day operations.
Officials are thought to have been working on a plan for the Government to inject new captial into the banks by taking shares in them — effectively a part-nationalisation programme.
Both Mr Darling and No 10 had been anxious to not be rushed into an announcement before the rescue plan had been fully finalised but the reaction of the markets appear to have left them with little choice but to bring forward the statement.