By Sky News
The chiefs of Britain's major banks are demanding action to calm the markets as they meet Bank of England governor Mervyn King today.
They will seek assurances that the BoE will provide extra financial help should it be needed.
Earlier the Bank made another £5bn available to lenders, taking the total on offer at its weekly cash auction.to £11bn.
This afternoon's meeting comes after another volatile day on the stock market that saw the share price of one leading bank fall by 20% at one stage.
It happened amid claims of traders spreading false rumours and dealing off the back of them.
The BoE took the unprecedented step of denying reports that Halifax Bank of Scotland (HBOS) had turned to it for emergency funding.
A spokesman for the Bank said today's meeting was scheduled last week and was not in response to any specific event.
He described it as part of a "regular exchange of views" between the central bank and the big five high street banks.
These are HBOS, HSBC, Royal Bank of Scotland, Barclays and Lloyds TSB.
The Financial Services Authority has meanwhile launched an inquiry into alleged market abuse following Wednesday's activities.
A spokesman said it would "not tolerate market participants taking advantage of the current market conditions to commit abuse".
HBOS closed 7% down in London despite branding the rumours about it as "malicious" and "lies".
The FTSE 100 Index ended up 60.2 points down at 5545.6, mainly because of the falls in HBOS shares.
It has been another turbulent day in the international stock markets.
In the US, the Dow Jones industrial average fell 2.36% to 12,099.66 - just a day after a 3.5% surge.
Asian markets also tumbled in early trading today, and there were falls in Australia, New Zealand, South Korea and Thailand.
Governor Mervyn King has told bank bosses he is sympathetic to appeals for more help, the BBC has learned.
The banks want to be able to use a wider range of collateral, including mortgages, for Bank of England loans.
Mr King had been reluctant to allow that so he would not be seen as bailing out banks that had behaved foolishly.
The Bank of England is said to be considering whether it can provide support similar to the US Federal Reserve.
Chief executives from HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS held a meeting with Mr King on Thursday.
It is understood the governor was alarmed by the recent fall in the HBOS share price on the back of erroneous rumours that the leading mortgage bank was in financial difficulties.
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It is
understood Mervyn King was alarmed by Wednesday's raid on HBOS shares
Robert Peston, BBC business editor |
The BBC's business editor Robert Peston said the bank bosses believe they would be less vulnerable to damaging speculation if the Bank of England said it was prepared to make good any hole in their finances stemming from the current crisis in banking markets.
"Although the Governor of the Bank, Mervyn King, asked them not to divulge what they discussed, I have learned he signalled - for the first time - that he was sympathetic to their request that in an emergency they should be able to swap a wider range of assets, including their mortgages, for loans from the Bank of England," the BBC's business editor said.
Before the meeting with bank chiefs, the Bank of England injected an extra £5bn into the money markets in an attempt to ease concerns about the liquidity of the banking system.
The loans were added to the normal weekly funds offered to commercial banks, making £11bn now available.
Three times over-subscribed
The Bank said an extra £5bn a week would be released at least until its next monthly meeting on interest rates on 9 April.
This week's additional funding was three times oversubscribed and both the European Central Bank and the US Federal Reserve have made much more money available to their banks with wider collateral accepted.
HBOS shares were among the top gainers on the London Stock Exchange on Thursday, up 6.2% recovering most of their falls from the previous day.
On Wednesday, the Financial Services Authority (FSA) said it would "not tolerate" traders starting "false" rumours about firms to make cash from dealing in their shares.