Darling hails £50bn bank aid plan

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Mr Darling told MPs the announcement would help resolve problems in the wholesale financial markets. It should subsequently assist businesses, individuals and the mortgage market.

Flanked by the Prime Minister, Mr Darling said financial markets around the world remained "turbulent" but insisted the UK financial system remained "fundamentally strong".

The Bank of England's move will see banks able to swap their riskier mortgage-backed assets for Government bonds to shore up their finances.

Reporting to MPs as they returned to Westminster after the Easter recess, Mr Darling said in a statement the scheme was developed after extensive discussions with the Treasury and the Financial Services Authority.

"The UK financial system remains fundamentally strong and the Bank of England's action has helped take some of the pressure out of the system by giving the banks additional liquidity to continue their usual banking operations."

Shadow Chancellor George Osborne broadly welcomed the Bank's move but urged the Chancellor to promise that there would be no loss to the taxpayer.

Mr Darling said there was no subsidy to the banking sector.

The scheme was a further step towards tackling the problems arising primarily from the US sub prime mortgage failure.

Under it the banks will continue "to hold the risk on the securities they provide, so it is them rather than the Bank of England that will be exposed to any fall in value".