The UK Treasury is shortly to announce the creation of a Bank Reconstruction Fund, a separate vehicle set up to buy £50bn to £75bn in preference shares from the hard-pressed banking sector. It is possible that the vehicle could be available to inject capital as soon as Monday when markets re-open.

Separately, money markets remained frozen on Friday with the difference between three-month London Interbank Offered Rates and risk-free rates rising further to about 220 basis points, an indication banks have all but halted lending. Money market traders said that they were not prepared to resume lending until government bail-out schemes were actually in place.