Assuring that the move would help stabilise eight major British banks, the Prime Minister Gordon Brown billed it as a "radical" plan to restore public "confidence and trust" in the financial system.

Under the move unveiled half an hour before the markets opened on Wednesday, the treasury said it would be investing upto 50 billion pounds in exchange for preference shares in eight of the country's largest banks and building societies: Abbey National PLC, Barclay's PLC, HSBC, HBOS, Lloyds TSB Bank, Royal Bank of Scotland, Nationwide building society and Standard and Chartered Bank.

Prime Minister Gordon Brown told newsmen at 10, Downing Street: "Extraordinary times call for the bold and far-reaching solutions."

"Our stability and restructuring programme is comprehensive, it is specific and it breaks new ground. This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem," he said.

Chancellor of Exchequer Alistair Darling said the scheme would see taxpayers' money used to buy stakes in major banks in an attempt to halt the meltdown in the financial sector.