Brown hosts talks on economic crisis

Gordon Brown is holding talks with the governor of the Bank of England and the chairman of the Financial Services Authority tonight on the worsening financial crisis.

The Prime Minister's spokesman said Mr Brown, together with Chancellor Alistair Darling, would meet governor Mervyn King and FSA chairman Lord Turner of Ecchinswell from 5pm.

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The spokesman denied that it was an emergency meeting and said the talks would look at both the "ongoing action" the authorities were taking to stabilise the financial system and their proposals for long-term reform.

The spokesman said the meeting had been in the diary for some time and was the latest in a series of "intensive discussions" which have been taking place between the Government, the Bank, and the FSA.

The disclosure that the talks are taking place will fuel speculation that the Government is preparing to bring forward the announcement of a rescue plan for Britain's banks after their shares took another pummelling on the markets.

The spokesman said any announcement would be made in a "calm, orderly and responsible" fashion.

But Liberal Democrat treasury spokesman Vince Cable warned that the turmoil in the markets meant that the authorities may have little choice but to rush out the announcement.

"We are dealing with an emergency problem here. It is the only way that these banks are going to be able to survive the storm," he told the BBC.

"There is a lot of talk about this happening and and I fear that this is actually contributing to a climate of uncertainty.

"People are not sure exactly what the Government is going to do so it probably will have to come forward with proposals earlier than it feels comfortable with simply in order to deal with the uncertainty."

Mr Darling, Mr King and Lord Turner will initially meet as the tripartite committee responsible for maintaining financial stability before being joined by Mr Brown.

Earlier, the Prime Minister briefed the weekly meeting of the Cabinet on the latest developments just as the Royal Bank of Scotland became the latest victim of the fear and uncertainty gripping financial markets.

At one point, shares in RBS dropped 40 per cent following a report that its chief executive, Sir Fred Goodwin, had met Mr Darling last night - with the bosses of Barclays and Lloyds TSB - to discuss an injection of Government cash.

RBS was forced to issue a statement insisting it had not made any request for Government capital.

Downing Street made clear its irritation at the way details of the meeting had apparently leaked out.

"The Government is certainly not going to engage in irresponsible briefing," Mr Brown's spokesman said.

There is widespread speculation that the Government is preparing to bolster the banks' balance sheets by taking shares in them - effectively a part-nationalisation.