Mervyn King, the Governor of the Bank of England, said today that more UK banks would follow Royal Bank of Scotland (RBS) in raising fresh equity as he unveiled details of his plan to inject £50 billion of liquidity into the paralysed banking system.

Mr King said: "I am pleased that banks have recognised the need to raise capital. I expect we will see more of it in the coming weeks."

Barclays and HBOS are seen as the most likely large contenders to follow RBS, which is expected to publish details of a £10 billion capital raising — the biggest rights issue in British history — tomorrow.

Smaller banks such as Alliance & Leicester and Bradford & Bingley may also have to strengthen their balance sheets.

This morning, the Bank of England published full details of a £50 billion bailout in which it will accept banks' UK and European mortgage-back assets in exchange for government bonds. Banks will be allowed to swap assets for up to three years.

It is hoped that this will stimulate cheaper borrowing between banks to allow them to pass on cheaper mortgage deals to their customers.

While US banks have rushed to beef up their balance sheets by issuing new equity since December, UK banks have been reluctant to do so — to growing concern within Threadneedle Street, home of the Bank of England.

Mr King hailed the new bonds-for-mortgages scheme as the best way of improving liquidity in the banking system and restoring confidence and insisted that it was not a bailout.

He said: "This is not a bailout for banks. The objective is not to protect the banks. It is to protect the public from the banks."

He also emphasised that the scheme could not be used to prop up a failing bank, nor to underpin the sliding housing market. "It is not available to a failing institution," he said.

"There needs to be some adjustment to the housing market," he added: "This scheme is designed not to impede that."

He also said that it would not increase the Government's net debt and should therefore not raise the cost of borrowing for the Government.

"The biggest risk of the scheme is that it will be seen to have been unnecessary. That's the worst that can happen."

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