RBS loses 35% in early trading

British banks were feeling the immediate effects of yesterday's slump - the FTSE 100's worst day trading in 20 years, plunging 7.85 per cent. In the first few hours the FTSE 100 rose by almost three points but soon lost almost all its gains. The initial rally was crushed as banks suffered further losses; the Royal Bank of Scotland (RBS) saw 35 per cent wiped off its value, Barclays was down 15 per cent while HBOS lost six per cent.

In Asia the response was mixed, with Japan's Nikkei index plunging than five per cent before bouncing back to close three per cent down. Australia's financial markets were revived after the Reserve Bank of Australia made a surprise interest rate cut of one per cent.

A frenetic day's trading yesterday saw $2.5tr wiped from share values. Panic-stricken investors flogged off oil, stocks and currencies in response to governments' failure to calm fears of a global recession. London's FTSE 100 recorded its biggest-ever points fall yesterday, down 391 at 4,589.

Yesterday British blue-chip companies dropped in value by £93 billion. Worst hit were bank shares as vulnerable currencies were traded in for the relative safety of gold and government bonds. Selling began overnight in Asia, moved to Europe and finally hit Wall Street. By mid-afternoon in New York the Dow Jones industrial average (pictured) was down 785 points by mid-afternoon - on course for its biggest-ever one-day fall, although it later rallied, finishing 370 points down.

Despite an earlier pledge by Chancellor Alistair Darling that he would do "whatever it takes" to assist Britain's banks, his statement to the House of Commons failed to calm nerves. The FTSE fell two per cent during his speech, which lacked any specific detail of a plan to salve the economic situation.

Treasury is believed to be considering a £50 billion bail-out plan for high street banks as a last resort. Yesterday Darling refused to confirm such a plan, saying it would be "irresponsible to speculate" on future responses.