Gordon Brown has announced a £50 billion bank bail-out plan by the Government, saying it should restore "confidence and trust" to the financial system.
The Prime Minister told a Downing Street news conference: "Extraordinary times call for the bold and far-reaching solutions that the Treasury has announced today.
"Our stability and restructuring programme is comprehensive, it is specific and it breaks new ground.
"This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem."
Chancellor Alistair Darling has launched a range of extraordinary measures that will see public cash used to buy stakes in stricken banks.
Eight UK banks and building societies - including Royal Bank of Scotland, Barclays, HBOS, Lloyds TSB and Nationwide - have signed up to an initial £25 billion scheme.
And the Government said it stood ready to make at least another £25 billion available for other eligible institutions. The Bank of England is also helping ensure that banks have enough cash to run their day-to-day activities.
It is pumping another £200 billion into money markets under its existing Special Liquidity Scheme that allows banks to swap risky assets for Treasury bonds.
The Government is also making a further £250 billion available for banks to guarantee debt. It is hoped that the package will provide the capital boost needed and help restore confidence to get banks lending to each other again.
But the Government is demanding that in return for the public-backed cash injection, banks must cap executive pay and shareholder dividends and commit to supporting lending to homebuyers and small businesses.
Details of the stake-buying scheme reveal that taxpayers will buy preference shares in the banks, which means that they will be first in line for the pay-out of dividends.
A statement said: "If the Government is to provide the capital, the issue will carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer.
"In reaching agreement on capital investment, the Government will need to take into account dividend policies and executive compensation practices and will require a full commitment to support lending to small businesses and home buyers."