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The statement cut estimates of a fall in the opening FTSE 100 fall this morning from 270 to 180. The FTSE opened down 140, government bonds dropped sharply, shares in RBS and Lloyds TSB rose, while Barclays fell.

Yesterday, HBOS shares slumped by 42 per cent, Royal Bank of Scotland was down 39 per cent and Lloyds TSB dived 13 per cent in another torrid day for the banks.

There were unconfirmed reports this morning that RBS chief executive Sir Fred Goodwin and chairman Sir Tom McKillop are to exit and be replaced by Stephen Hester, formerly of the Abbey, and Sir Philip Hampton, currently chairman of Sainsbury's.

RBS declined to comment, but a source close to the company said later that there was no truth in rumours that the bank's board is discussing the possibility of forcing their resignation in the near future.

Giving them more of our cash may not be enough

The Bank and the Treasury believe the move will benefit all banks but many bankers believe other measures will be needed

• British taxpayer to be tied into £50bn bank bailout

The taxpayer will pay in the end

Where will Alistair Darling find £50 billion in a hurry? The answer, inevitably, is from taxpayers

• It’s all very well, ensuring the survival of the banking system, but what’s in it for us?

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Lloyds TSB said it was assessing the implications of the plan and working with HBOS management on "all aspects of the transaction".

HBOS said in a statement: "The Government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system. HBOS believes that this initiative is very much in the interests of its shareholders and customers."

HSBC, Europe’s biggest bank, said it had no plans to use a UK government offer to recapitalise as it can keep a strong capital position through its own resources.

The bank said: “HSBC has no current plans to utilise the UK recapitalisation programme initiative announced today. We do agree to observe the tier 1 capital requirements but we will do this through our own resources.”

HSBC has one of the strongest capital and liquidity positions in the industry, with a tier 1 capital ratio of 8.8 per cent and a loans/deposits ratio of 90 per cent.

Standard Chartered said it remains well capitalised and highly liquid but will participate in the scheme to the extent that it makes commercial sense in the interest of shareholders.

Bank of England Governor Mervyn King said: “A major recapitalisation of the UK banking system of at least 50 billion pounds is a necessary condition for regenerating confidence in the financial system.

“The recapitalisation, further liquidity support from the Bank of England and the new guarantee scheme amount to a significant step forward in resolving the present crisis.”

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