British banks scrambled today to take part in a £10 billion auction by the Bank of England that lent 75 per cent of the liquidity injection at below its own interest rate.

The auction today by the Bank was part of a move by the world's top five central banks to inject $110 billion (£55 billion) of liquidity into the financial markets.

UK banks today borrowed £7.5 billion of the £10 billion three-month fund at 5.36 per cent, against the current interest rate of 5.5 per cent, which the Bank of England cut by a quarter-point at the beginning of this month.

An additional £1.35 billion will be auctioned next month.

The Bank had offered funding in September, but the high borrowing cost, at 6.75 per cent, and possible reputational damage deterred banks from bidding.

The European Central Bank (ECB) auctioned off a mammoth €348.6 billion (£249.1 billion) of funds, to be repaid after two-weeks, at below the eurozone interest rate, having broken with tradition late last night and revealed its new funding plan.

Markets have been in seizure for more than six months since the beginning of the sub-prime mortgage credit crisis.

The US Federal Reserve, ECB, the Swiss National Bank and the Bank of Canada are also taking part in the capital injections.

The ECB's auction sent two-week Euribor, or the rate European banks charge to lend to each other for this period, down to 4.45 per cent from 4.94 per cent, according to the European Banking Federation.

The ECB said that 390 banks had bid for the two-week loans at a marginal rate of 4.21 per cent.

Bids ranged from 4 per cent to 4.45 per cent.

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