The Bank of England has made its first move to help ease the liquidity crunch hitting the UK financial markets.
It has increased the amount of funds banks can deposit with it by 6 per cent to £17.6bn, and says it will increase this by a further 25 per cent if needed.
According to reports, the move could ease the rates banks are charging each other for short-term loans which have soared in the current climate.
The move by the BoE means that when banks need additional funds they will be able to draw on the extra money they are now effectively saving with the BoE.
This comes after the BoE has been repeatedly criticised for its lack of action following the fallout from the US sub-prime crash.
The BoE is expected to make a statement tomorrow following its decision on whether it will maintain, increase or decrease base rate this month.