HSBC, Standard Chartered, and Abbey National yesterday declared they had no intention of raising capital from the state, reinforcing the City�s belief that the UK Government�s £50bn offer is essentially aimed at Royal Bank of Scotland, Lloyds TSB, HBOS and Barclays.

HSBC, Standard Chartered, and Abbey National yesterday declared they had no intention of raising capital from the state, reinforcing the City's belief that the UK Government's £50bn offer is essentially aimed at Royal Bank of Scotland, Lloyds TSB, HBOS and Barclays.

The UK banking sector split itself in two on the issue of taking capital from government within hours of yesterday morning's announcement by Chancellor Alistair Darling of a total £500bn package aimed at restoring stability to the unhinged financial system.

This package crucially includes radical action to kick-start wholesale funding markets, with the government offering to guarantee new short and medium-term debt issuance by banks to the tune of about £250bn. As well as providing banks with vital liquidity, this should ultimately help support lending to businesses and consumers as the UK economy heads into recession.

The importance of this key liquidity measure to Bank of Scotland and Halifax parent HBOS, which is reliant on wholesale money markets for much of the money it lends on to customers, was reflected in a near-25% jump in the Edinburgh-based bank's shares yesterday.

When interbank lending markets seized up last month after the collapse of US investment bank Lehman Brothers, HBOS agreed what the City views as a rescue takeover by Lloyds TSB in the space of a couple of days. Yesterday's government package was viewed as increasing the chances of a smooth takeover of HBOS by Lloyds TSB, with the liquidity measures easing the Scottish bank's funding activities.

The Treasury said Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland, and Standard Chartered had committed to increase their total Tier 1 capital by an "aggregate" £25bn, but noted "individual increases will vary from institution to institution".

It declared that it would, to facilitate this, make £25bn available in Preference shares or permanent interest-bearing shares and added that, if requested, it was "also willing to assist in the raising of Ordinary equity".

The Treasury declared that, in addition, it "stands ready to provide an incremental minimum of £25bn of further support for all eligible institutions" through the same mechanisms.

However, in spite of the Treasury's seeming effort to paint the recapitalisation scheme as applying to all of the big banks, the responses from the various players in the sector underlined the differences between their specific requirements.

Those banks who do want capital from the government would seem certain to have to go public before long on the amount they are seeking and the terms on which it is being provided, raising the danger of further downward pressure on their share prices in these frenzied stock market conditions.

The Treasury made no bones about its desire to influence dividend policies of those banks it provided with capital, signalling there may be relatively small, if any, shareholder payouts for a while at these institutions. The Treasury also signalled it would scrutinise executive pay at recipient banks, and emphasised the importance of these institutions committing fully to support lending to small businesses and home buyers when accessing government capital.

Capital, the Treasury said, would "carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer".

Darling also increased the size of the Bank of England's Special Liquidity Scheme, which allows banks to swap difficult-to-trade assets such as mortgage-backed securities for gilts, to "at least £200bn". The scale of this scheme was not disclosed when it was introduced in the spring, but it has to date been estimated at about £100bn.

The chancellor also announced plans to introduce a "discount window" facility for banks, in a move which seems aimed at destigmatising unplanned approaches for funds to the Bank of England. Use of the Bank's current standing facility has tended to carry a stigma.

Crucially, the Treasury also said it would "on appropriate commercial terms", provide a "Government guarantee of new short and medium-term debt issuance to assist in refinancing maturing, wholesale funding obligations as they fall due". It added that it expected the take-up of this guarantee to be "of the order of £250bn".

This facility is being made available immediately to all eight institutions named. Continuing access to guarantees will depend on banks raising Tier 1 capital in the "amount" and "form" considered appropriate by the government.

Royal Bank of Scotland shares, hammered down to 15-year lows on Tuesday, plummeted further to an intra-day nadir of 72.6p shortly after the Treasury's announcement. Later in the morning, they were showing a significant gain but they ended up just 0.7p on the session at 90.7p.

HBOS shares finished 24.5%, or 23p, higher at 117p, at a 33% discount to Lloyds TSB's offer of 0.833 of its shares for every one in HBOS. Shares in HBOS, which on Tuesday night stood at only half the level of Lloyds TSB's offer, climbed to 155p at one stage yesterday.

John Kennedy, manager of Scottish Investment Trust, welcomed the Treasury's package for the UK banking sector.

He said: "The drive is on to recapitalise and then, you can only imagine, re-regulate, more heavily than in the past. The drive is on to have a far better-capitalised banking system, which you can only say, as an investor or an individual with a bank account, is a good thing.

"This is all happening in the teeth of a recession. The plan must be to avoid depression."

Bank of Scotland and Halifax parent HBOS said yesterday: "HBOS welcomes (the) announcement by the government about banking capital and a significantly enhanced wholesale money funding initiative. The government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system. HBOS believes that this initiative is very much in the interests of its shareholders and customers."

Sir Fred Goodwin, chief executive of Royal, said: "We welcome this comprehensive package of measures in response to unprecedented conditions in the financial system. These are a substantial and tangible demonstration of the government's commitment to ensuring the stability of the financial system and will allow banks to continue their support for customers across the economy. We intend to parti-cipate in certain of the measures announced by the government and will make a further announcement in due course."

Lloyds TSB said only that it welcomed the government announcement and would make a further statement in due course.

John Varley, chief executive of Barclays, said: "The package addresses the most significant issues in the market, namely confidence in the strength of the banking system and the working of the money markets." He added: "Barclays commits to participating in these measures in ways which will protect the interests of our shareholders and customers, and benefit the broader financial system."

There was some speculation in banking circles that Barclays could line up any fresh capital it might require from overseas institutions and perhaps even existing shareholders rather than go to government, but the bank appeared to leave its options wide open.

However, Standard Chartered stated bluntly that it did not intend raising capital.

Although welcoming the government scheme as "a cogent response on mult-iple levels", it added: "Standard Chartered is well-capitalised and is highly liquid, and will participate in the scheme to the extent that it is in the commercial interests of our shareholders. Standard Chartered do not intend issuing capital under this scheme."

HSBC took a similar line. It said: "These are important and necessary steps in restoring confidence to the sector. Consistent with the objectives of the UK scheme announced today, HSBC will ensure that our principal UK subsidiary, HSBC Bank plc, continues to be appropriately capitalised, funded from the group's internal resources. HSBC therefore has no current plans to utilise the UK recapitalisation initiative."

Abbey National, owned by Spanish bank Santander, said: "Abbey has no plans to utilise the recapitalisation scheme with government funds. Abbey is well-capitalised, with a strong Tier 1 ratio, and we will continue to comply with any additional capital requirements through internal capital generation sources."

Nationwide said: "The society is not under any capital pressure and already has a tier one capital ratio of 9.7% as at 4 April 2008."