HSBC raised the stakes surrounding the Government's £500 billion banks recapitalisation programme yesterday by announcing that it had injected £750 million into its UK business.

HSBC's speedy compliance with the Government's demand on Wednesday that all banks bolster their Tier 1 capital - a measure of financial strength - heightens the pressure on its rivals to respond.

HSBC said that it had funded the injection, which represents 1 per cent of the group's shareholder equity, from internal resources.

Most of the bank's rivals are likely to have to raise additional capital to meet the Government's demand. Abbey, which is owned by Santander, the Spanish bank, is expected to find a solution similar to that of HSBC.

Banks such as HBOS, Royal Bank of Scotland (RBS), Lloyds TSB and Barclays are expected to approach the Government this month to hammer out the details of how they will use the recapitalisation programme.

Although the scheme will run to the end of the year, sources said that the Treasury expected responses within a few weeks. Banks will talk to the Financial Services Authority (FSA) about the Tier 1 level at which they should aim. They will also sound out shareholders on their interest in participating in capital raisings. A bank source said: “We're talking weeks, not days, before decisions are made.”

HSBC also said yesterday that it had provided a “significant amount of liquidity” to the interbank lending market in the past three days, lending £4 billion in three-month and six-month money to other banks.

On Wednesday the Government announced that it would make £25 billion available to banks that wanted to issue preference, or permanent interest-bearing, shares. It will also hold aside £25 million to participate in other capital raisings.

The UK banks have an average total Tier 1 ratio of 9 per cent and the Government wants them to hit a 10 per cent average by the end of the year. But each bank's ratio will rise by different amounts, depending on the amount of risk-weighted assets that they hold on their books.

HSBC's UK bank had a 7.5 per cent total Tier 1 ratio at the end of last year. Even though it did not release an updated figure yesterday, it said that the group had a ratio of 8.8 per cent at June 30. “The group remains one of the most strongly capitalised and liquid banks in the world,” HSBC said.

The banks are expected to have individual negotiations with the Treasury over the coupon that they must offer on their preference shares and any redemption terms.

Barclays, which received £4.5 billion in extra capital from new and existing overseas investors earlier this year, is expected to offer top shareholders the first opportunity to buy its preference shares before it decides whether to tap the Government for cash.

Bruno Paulson, senior analyst at Sanford Bernstein, said yesterday that he expected the coupon on the shares for most banks to be between 9 per cent and 10 per cent.

Mr Paulson calculated that RBS could need to raise as much as £7.6 billion to hit the Government's target, while Barclays would need £5.5 billion, Lloyds TSB £2.4 billion and HBOS £4.6 billion.

Meanwhile, the Irish Government yesterday extended its guarantee of the country's bank deposits to five foreign-owned banks, raising taxpayers' potential liability to €485 billion (£385 billion).

Brian Lenihan, the Irish Finance Minister, said that the scheme, which already guarantees the debts and deposits of the six biggest Irish-owned banks, would also be available to Ulster Bank, which is part of RBS, First Active, Halifax Bank of Scotland, which is part of HBOS, IIB Bank, which is owned by Belgium's KBC, and Postbank, a joint venture between Fortis, the Belgian bank, and the Irish Post Office.

The European Commission said yesterday that it had not yet received any information from the Irish Government on the guarantee scheme and that it had therefore not been examined to ensure that it did not breach competition rules.

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