The British government has admitted the banking system is facing a period of extra-ordinary turbulence, but is confident the multi-billion euro rescue plan will work. The government is also guaranteeing inter-bank lending in the hope of freeing up liquidity in the market which has all-but dried up.

“Good strong banks are essential for every family and for every business in the country and extraordinary times call for the bold and far reaching solutions that the Treasury has announced today,” said Prime Minister Gordon Brown. “The problems that started in America have now hurt every banking system in every continent in the world.”

The Chancellor Alistair Darling insisted the bank rescue plan and a 250 billion euro line of credit will have a positive effect.

“We and every other government in the world send out a clear message, that we will stabilise the position,” he said. “We will help banks restructure so that they can rebuild their strength, and also do everything we can, whatever it takes, to ensure that we get that stability. And we will try and steer our way through a pretty, pretty turbulent period.”

Seven major British banks, including Barclays, Lloyds TSB and the Royal Bank of Scotland have indicated they will take advantage of the scheme. One leading exception is HSBC, which has made it clear it will not.

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