European central banks have matched heavy demand for dollar liquidity by pumping more than $250bn into financial markets in the latest move to restore their proper functioning.

In an unprecedented joint action, the European Central Bank, Bank of England and Swiss National Bank met in full all bids for seven-day dollar funds at a fixed interest rate. It came as signs increased that government financial sector bail-out plans unveiled around the world were starting to calm nervous banks, which had stopped lending to each other.