The banking sector has been battered on the London Stock Exchange over reports leading lenders went begging to the Chancellor.

Royal Bank of Scotland boss Sir Fred Goodwin and his rival counterparts at Barclays and Lloyds TSB met Alistair Darling with a possible capital injection for the sector reportedly on the agenda.

However, RBS and Barclays both denied asking for fresh capital while Lloyds TSB refused to comment.

RBS shares finished the day 56.9p down at 91.2p - a fall of 39 per cent and just off its lowest price for 15 years. Lloyds TSB were 13 per cent lower while Halifax Bank of Scotland shares plummeted 41.5 per cent and Barclays were 9.25 per cent down.

The Government is reportedly willing to step in and buy large stakes in troubled banks to make extra cash available in what would amount to a part-nationalisation.

It is thought that as part of any US-style rescue plan, banks would have to come clean over the extent of their exposure to bad debt before securing Government cash.

But a lack of any real announcement on the issue has flooded the FTSE 100 index with nerves.

Prime Minister Gordon Brown, Chancellor Alistair Darling and Bank of England governor Mervyn King are meeting for talks on stabilising the banking system.

A spokesman for Mr Brown denied it was an emergency meeting, but pressure is mounting on the Government to take swift action to restore confidence.

He said the meeting, which will also be attended by Financial Services Authority head Adair Turner but not by banking executives, was prearranged and "not put in the diary today".

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