The UK government has announced details of a rescue package for the banking system worth at least £50bn.

It will make extra capital available to eight of the UK's largest banks and building societies.

In return for the funding, the government will receive preference shares in those institutions.

A further £200bn will be made available by the Bank of England for short-term borrowing to provide liquidity to banks and building societies.

The banks that have confirmed they will take part in the scheme are Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered.

The massive public bail-out comes after a day of turmoil on the London stock exchange, where shares in banking group RBS fell 39% to add to a 20% tumble the day before. Rival HBOS fell 41%.

Faced with an intensifying banking crisis, the prime minister sanctioned moves for the taxpayer to recapitalise Britain’s leading banks in an effort to restore confidence in the system and to allow them to start lending again. The total cost of the scheme was estimated at £35bn-£50bn – roughly equal to £1,400-£2,000 per taxpayer – although final details were being hammered out overnight before a statement by Alistair Darling, chancellor, this morning.

Royal Bank of Scotland, Barclays and Lloyds TSB – which is in the midst of a takeover of HBOS – are expected to be the main recipients of the capital. It was unclear whether HSBC, which already has stronger capital reserves, would participate in the plan, although if it does it is likely to take a smaller amount.

The rescue plan is also expected to include a guarantee that the government will make available all the cash required by the banks to carry out their dayto-day operations.

BBC, Financial Times, The Times