Chancellor Alistair Darling today hinted the Government would consider increasing a £50 billion bailout to help UK banks, after telling MPs he would "take further action" to restore financial stability.

Mr Darling addressed the House of Commons after the Bank of England outlined a plan to provide more liquidity to banks by allowing them to swap their UK and European residential mortgage backed assets with government bonds.

Banks can use the bonds as collateral to raise money, which the Government is hoping will cut the cost of borrowing between banks in the wholesale funding market. It is then hoped banks will pass on lower borrowing costs to their customers and mortgage holders in the retail market.

Mr Darling maintained that the UK economy remained strong.

However, he said: “... as banks here and across the world disclose their losses and strengthen their financial positions which will help rebuild confidence, the opportunity arises for the bank of England to ease conditions in the financial markets.”

Mr Darling said: "In addition to the Bank of England's announcement I can confirm to the House that the Government will take further action at home, and internationally, to restore stability in financial markets."

The Times revealed today that the £50 billion bailout could double to £100 billion if the slowdown in the wholesale lending market continues to hurt borrowers.

Mr Darling also said: "It is important that banks continue to make full disclosure of their exposure to losses."

The Royal Bank of Scotland is forecast to announce £6 billion worth of writedowns tomorrow when it is also expected to go ahead with a £10 billion rights issue and plans to raise money though asset sales.

Over a week ago, the Chancellor attended the G7 Summit in Washington where he called on banks to be as open as possible regarding their losses while calling on the International Monetary Fund to act as an early warning system to pick up tremors in the global financial markets.

Mr Darling said the Government was focused on helping homeowners, especially those with mortgages which are about to mature and who face higher home loan costs from banks.

He said: "We are determined to do everything we can to help homeowners so I am meeting the Council of Mortgage Lenders, the Finance and Leasing Association and major lenders tomorrow."

"I will be discussing how banks and building societies can help people whose fixed rate mortgages are coming to an end as well as helping people who may get into difficulties in repaying their mortgages."

Echoing the Bank of England's Governor, Mervyn King, this morning, Mr Darling insisted taxpayers are not at risk under the new scheme announced today.

In contrast, taxpayers ended up on the hook to the tune of £100 billion when the Bank of England was forced to step in and save Northern Rock.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive