The UK government is being pushed to invest £45 billion in the banking sector to shore up confidence, it emerged last night.

Following a meeting between the heads of RBS, Lloyds TSB and Barclays, Alistair Darling and Mervyn King, head of the Bank of England, at Downing Street, a deal was proposed for the government to strengthen the capital of the banks.

Details of the plans are still unclear, but it could see the UK taxpayer taking a £50 billion stake in UK banks – which would improve the firm’s capital position, knocked by subprime losses.

This leaves the taxpayer at risk if the share prices of banks fall further.

It is hoped the added capital will increase the ability of banks to lend to each other – which is causing the credit crunch.

Currently banks find themselves in a position where they are forced to sell assets and rein in lending to preserve cash.

The BBC reports Lloyds TSB, Barclays and RBS are all looking for £15 billion each – with the hope of £7.5 billion upfront and £7.5 billion in Treasury guarantees.

However, Mr Darling has given no solid guarantee as he heads into a meeting today in Luxemburg with the EU finance ministers.

One sticking point remains on what the Treasury would get for its £45 billion injection.

It is reported the government is pushing for preferred stocks and warrants over the ordinary shares.

Yesterday, Mr Darling told parliament he had the “responsibility to support a stable and well-functioning banking system” and he would “do whatever is necessary to maintain stability”.

Today on the markets, the RBS share price was down 30.79 per cent to 102.50p at 9:29 BST – compared to a 52-week high of 579p.

Barclays is down 11.94 per cent, HSBC gained 0.71 per cent and Lloyds TSB was down 15.83 per cent.