LONDON - BRITAIN unveiled a US$437 billion (S$641 billion) bank rescue on Wednesday as markets around the world bombed over fears that the worst financial crisis in decades has still not been mastered.

Tokyo stocks slumped more than nine percent and European shares also fell heavily. Central bank moves to increase the amount of available credit did little to calm the panic.

Bank of England to cut interest rates amid economic fallout LONDON - THE Bank of England was widely forecast to slash British interest rates on Thursday in a bid to prevent a long and painful recession amid a growing global financial crisis, analysts said. Most economists predict the BoE's monetary policy committee (MPC) to reduce borrowing costs by a quarter or even a half point, that would take the key lending rate to 4.75 or 4.50 per cent, after a two-day meet that begins on Wednesday. ... more Analysts split on British bank rescue plan LONDON - ANALYSTS were divided on Wednesday on whether Britain's multi-billion dollar plan to support its ailing banks would be enough or whether it was too little too late. The plan involves using taxpayers' money to buy major stakes in the country's major financial institutions, providing short-term loans and issuing a government guarantee on loans between banks. ... more

Britain announced a 50 billion pound (S$128 billion) part nationalisation of the country's eight main banks. The Bank of England will also extend a 200-billion-pound credit line for banks.

The British taxpayer will in return get major stakes in HSBC, Royal Bank of Scotland, Barclays, HBOS, Lloyds TSB, Standard Chartered, Abbey and Nationwide Building Society.

Finance minister Alistair Darling said the move by the centre-left Labour government was a bold response to 'extraordinary times'.

Talks over the public stakes were only completed a few hours before the announcement.

'The taxpayers' interest is being protected. I'm very clear that in return for all this, the taxpayer has got to see some upside,' Mr Darling told Sky News television.

The British package followed desperate efforts by other governments.

The European Central Bank said it would pump US$70 billion dollars into interbank money markets in one-day loans on Wednesday, raising the daily amount by US$20 billion.

The US Federal Reserve said on Tuesday it would buy up short-term debt - extending its move into the economy - and central bank chairman Ben Bernanke strongly hinted that a US interest rate cut was on the cards.

Japan and Australia pumped billions of dollars into the banking system and Hong Kong slashed interest rates, but there was no stopping the market misery.

'These sorts of measures aren't working anymore,' said Hiroichi Nishi, a broker at Nikko Cordial in Japan. 'It's like you're trying to pump blood into a heart with clogged arteries.'

The Tokyo stock market suffered what amounted to an indiscriminate sell-off, with investors dumping shares across the board, sending the Nikkei down 9.38 per cent - its biggest one-day plunge since the stock market crash of 1987.

London's FTSE 100 index fell 1.64 percent despite the government billions, Frankfurt stocks opened with a loss of 1.68 percent and Paris was down 3.7 percent.

Australia shed 5.0 per cent and Hong Kong lost 7.0 per cent.

On Wall Street, the Dow Industrial average gave up 5.1 per cent on Tuesday to close at a new five-year low.

Stock market dramas were played out around the world with the Dubai market down more than 9.0 percent and India's main market showing a new eight percent loss.

'The deepening credit crisis stoked fears that the global economy may be dragged into recession,' said Matthew Kwok, research head at Tanrich Securities in Hong Kong. 'It is hard to forecast a bottom.' Governments tried new measures to shore up confidence and keep money available to banks in the face of a credit crunch sparked by subprime mortgages gone bad in the United States.

Japan pumped another 2.1 trillion yen (S$30.4 billion dollars) into money markets, its 16th straight day of intervention, while Australia injected more than 850 million dollars.

Hong Kong, which normally follows rate decisions in the United States, struck out on its own to announce a 1.0 per cent cut in its key lending rate.

US President George W. Bush discussed the economic meltdown with leaders of Britain, France and Italy, seeking a common strategy ahead of crisis talks between the Group of Seven major economies in Washington on Friday.

'I was on the phone with them this morning to ensure that our actions are closely coordinated. We live in a globalised world,' Mr Bush said. 'We want to make sure that we're effective.'

The grim toll on the world economy is becoming clearer with as much as two trillion dollars wiped off the value of US retirement plans in the last 15 months, the head of the Congressional Budget Office, Peter Orszag, said in Washington.

Vacant office space in Manhattan has risen by a third this year, as the financial sector went into meltdown and thousands of New York workers lost jobs, the Cushman and Wakefield real estate firm said.

The crisis has its roots in a wave of loans to US homebuyers with dark credit histories. Once people began to default on so-called subprime mortgages, a chain reaction of chaos ensued.

Housing foreclosures sent home values plunging, and the US housing market fell apart. Meanwhile the loans themselves had been re-packaged as complicated investment products and resold.

As bank after bank realised the extent of its investment in these bad debts, they saw they had less money available to make new loans while their own share prices began to collapse - and the global meltdown began. -- AFP