More than £2.5 billion was slashed from the value of Britain's High Street banks today, after mortgage lender Bradford & Bingley (B&B) was forced to deny that it plans an emergency rights issue to prop up its balance sheet.

Despite its assurance that it is not intending to raise new equity capital and is funded for the rest of 2008 and into 2009, B&B shares fell 91/4p to 158p. They closed at 1671/4p on Friday, having fallen 35% this year alone.

Deutsche Bank, which already had a sell recommendation on B&B shares, cut its price target from 180p to 150p today.

The sell-off prompted fears of a repeat of last month's attack on rival bank HBOS. Its shares collapsed 70% at one point on a day when rumours swept the City that it had applied to the Bank of England for an emergency loan.

This was vigorously denied both by HBOS and the Bank, prompting a probe by the Financial Services Authority into where the rumour began and who sold shares on the back of it.

Bradford & Bingley, Alliance & Leicester and HBOS are seen as the British banks most vulnerable to the credit crunch. Each used similar funding devices to the now-nationalised Northern Rock, although none of them relied quite so heavily on the money markets to fund their mortgages.

Analysts believe all the banks are looking to strengthen their balance sheets as soon as they can. Robert Law at Lehman Brothers, said that once one High Street bank announces a rights issue others will be under pressure to follow suit.

He said: "I think they will look at shedding assets before raising equity."

B&B, headed by Steven Crawshaw, said that in the current market environment it was monitoring "closely the balance sheet strength of the business and its funding plans".

Tomorrow, Prime Minister Gordon Brown is due to meet bank bosses following his Chancellor Alistair Darling's call for them to pass on interest rate cuts to mortgage customers.

Last week's quarter-point cut by the Bank of England was followed by one major lender, Nationwide, actually increasing the rates on its fixed-term mortgages. The banks' top executives will tell Brown they need to see more intervention from the authorities to improve liquidity in the money markets and increase confidence.