The government will take stakes in financial firms in a bid to boost confidence in the sector.
Chancellor of the exchequer Alistair Darling released details of the government's plan to buy shares in banks this morning.
The "part-nationalisation" plan is aimed at boosting confidence in the financial system, which has been put under severe pressure by the freezing of credit markets and days of very volatile trading in equities markets. Around £50 billion of taxpayers' money will be used to buy the shares, though this total could rise.
Around £200 billion has also been earmarked by the Bank of England for short-term lending to crisis-hit banks.
A total of eight financial firms - Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide, Royal Bank of Scotland and Standard Chartered - will be covered by the scheme. Other banks will have to apply to take part.
"[The banks have] got additional capital now if they want it, they've got an unlimited source of liquidity," Terry Smith, chief executive at broker Tullett Prebon, told the BBC.
"That certainly should stop the panic in terms of people wondering whether or not the banks are safe."
Yesterday, the FTSE closed at 4605, 0.35 percent up. However, banking shares were badly affected as investors continue to lose confidence in the stability of financial services firms.
RBS and HBOS were worst hit, with their stocks closing at 39 and 42 percent down on the day respectively.
