The money-markets crisis spilled into Asia today as the South Korean government said it would intervene to boost liquidity for its banks.

South Korea, whose stock market has tumbled far more than others in the region, will use part of its $240 billion (£137 billion) of foreign reserves to give its banks access to foreign capital as western banks refuse to lend to the country.

While less dramatic than the actions in Europe at the weekend, Korea's move highlighted how interlinked the banking system now is.

Finance minister Kang Man-soo warned that the credit squeeze would hit emerging markets such as his, and it would be some time before the US bailout plan helped. He added: “Recently, our financial institutions began experiencing troubles in securing foreign-exchange liquidity.

The government judges that we need to deal with the situation pre-emptively while assuming the worst-case scenario.”

Meanwhile, the country's top financial regulator said he would encourage state-run banks such as Korea Development Bank (KDB) to try to expand borrowing abroad.

Financial Services Commission chairman Jun Kwang-woo said the financial authorities would also push ahead with plans to sell stakes in state-run banks to secure foreign capital.

Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong, said: “It's become far more of a global issue that now requires far more of a global solution. Central banks are now being seen as the main providers of liquidity and it's very bad for sentiment.”

KDB was at one stage considering buying 25% of Lehman Brothers before the US firm hit the rocks.

Governments in the region have been pumping cash into the system to try to prevent contagion from the credit crisis. The Bank of Japan has injected 20 trillion yen (£108 billion) into the financial system in the past three weeks.