Alistair Darling, the British chancellor, was last night considering a dramatic taxpayer-funded recapitalisation of Britain's banks, amid signs from David Cameron, leader of the opposition Conservatives, and Mervyn King, Bank of England governor, they would support an effective part-nationalisation of the sector.

Mr Darling yesterday said he was "looking at some pretty big steps which we would not take in ordinary times", which government officials say include a contingency plan for the taxpayer to inject capital into ailing banks.