Three British banks have been bailed out by the UK Government, after it agreed to nationalise them in the aim of encouraging financial markets and banking confidence. This move will make now UK tax payers the shareholders of the bailed banks.

Royal Bank of Scotland (RBS) is said to receive £20 billion, Lloyds TSB and HBOS will receive £12 billion while Barclays will receive £ 9 billion pounds. Moreover the banks have also has billions of pounds worth of bad debt written off from their books.

The BBC’s business editor Robert Peston said: "perhaps the most extraordinary day in British banking history." He also urged that banks should not lend to people or companies if they cannot pay back their balances.

However the news shows positive signs as the FTSE 100 index increased by eight per cent, after the UK Prime minister Gordon Brown, announced the measures that will be taken to encourage banks to lend to each other.