The coordinated steps followed a pledge on Sunday night by European leaders to bolster market confidence as the global economy slides toward recession.
The agreement among heads of the 15 countries using the euro helped trigger a rally in stocks and the euro after a market rout.
The Dow Jones Stoxx 600 Index jumped a record 10% after slumping 22% in the worst drop in its 21 year history. The euro climbed 1%.
Wall Street was up more than 11% in an explosive day of record gains. Morgan Stanley surged 87% after its deal with Mitsubishi of Japan was recast anddone.
In Germany, the Government said it would guarantee up to 400 billion euros of lending between banks and set aside 20 billion euros to cover potential losses. It will also provide as much as 80 billion euros to recapitalize banks.
In France, the Government will guarantee 320 billion euros of bank debt and set up a fund allowed to spend up to 40 billion euros to recapitalize banks.
This will be in addition to moves already taken to bail out Dexia with 6.4 billion euros of support with Belgium and Luxembourg last week and guaranteeing Dexia's borrowings.
BNP agreed to buy 75% of the Belgian and Luxembourg assets of Fortis after the Dutch Government paid over 16 billion euros for the bank's operations in its country.
Spain's cabinet approved measures to guarantee up to 100 billion euros of bank debt this year and authorized the government to buy shares in banks in need of capital.
Last week, Spain was one of the countries to produce unilateral measures to shore up banks, pledging to buy up to 50 billion euros of assets.
The Austrian government will set up an 85 billion-euro clearinghouse run by the central bank to provide cash by holding illiquid bank assets as collateral. Austria also pledged to buy banking shares if and when domestic financial institutions seek to sell new stock.
The Dutch government will guarantee up to 200 billion euros of interbank loans, it said in a letter to parliament.
Italy will guarantee some bank debt and buy preferred stock in banks if necessary, but didn't provide any figures.
Italy's biggest bank, UniCredit announced a 6.6- billion-euro capital boost last week that included dropping the cash dividend and using shares.
Britain wasn't part of the moves because it doesn't use the euro. It had earlier used its own scheme to inject funds into Royal Bank of Scotland, HBOS, and Lloyds TSB.
They will get 37 billion-pound ($US64 billion) bailout from the and Royal Bank of Scotland and HBOS will cede majority control to the government; give the government seats on their boards; the right to halt dividends and power to limit executives' bonuses. RBS CEO, Sir Fred Goodwin and HBOS CEO ANDY Hornby will step down.
Sunday's agreement, combined with the Federal Reserve's promise of unlimited dollar funding, helped nudge money- market rates lower.
The London interbank offered rate, or Libor, for three-month dollar loans dropped 0.07% to 4.75% today, tied for the largest drop since March 17, the British Bankers' Association said.
The US Federal Reserve has promised that the world's major central banks will offer financial institutions unlimited US dollar funds in an effort to ease tensions in money markets.
The European central bank, the Bank of England and the Swiss central bank will conduct dollar auctions at maturities of seven days, 28 days and 84 days at a fixed interest rate, Fed said on its Web site today. The Bank of Japan is considering "similar measures.''
It comes as the UK and eurozone start revealing the shape of the bank rescue packages.
The UK, the eurozone and countries like Australia are guaranteeing or supporting either interbank or offshore wholesale funding for banks. The Fed is also financing the US commercial paper market for corporates.
Global central banks are stepping up efforts to counter the worst financial crisis since the Great Depression. In addition to cutting borrowing costs in a coordinated intervention last week, policy makers have injected billions of dollars into global money markets to facilitate lending.
Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets," the Fed said in its statement.
"Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction.
Accordingly, sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded."
Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets.
The Fed said the ECB, the BOE and the Swiss National Bank "can provide U.S. dollar funding in quantities sufficient to meet their demand'' into 2009.
"To assist in the expansion of these operations, the Federal Open Market Committee has authorized increases in the sizes of its temporary swap facilities with the BoE, the ECB, and the SNB, so that these central banks can provide U.S. dollar funding in quantities sufficient to meet demand.
"These arrangements have been authorized through April 30, 2009. " That's four months later than the swaps revealed by the Fed and other major central banks 10 days ago.
In Britain even thought it had been well anticipated, the actual event was dramatic. A decision by the bank which emphasised the decisive nature of the action organised by the UK Labour Government.
The move by the UK Government was more dramatic than first thought; as a pre-condition of Government help, the banks getting the aid had to abandon dividend payments.
So, some of Britain's largest banks will be scrapping dividends as part of the plan to inject £37 billion into three of the country's largest lenders.
Under the terms of the bailout, Royal Bank of Scotland, Lloyds TSB and HBOS will be prevented from paying dividends on ordinary shares until they have repaid in full a total of £9 billion in preference shares they are issuing to the government.
Barclays, which is hoping to avoid government support by raising around £6.6 billion from private investors, has scrapped its final dividend for 2008 in a move designed to save £2 billion.
RBS is getting more from the government than any UK bank and taking almost all the initial 25 billion pounds that the Government earmarked last week as the minimum needed to shore up the industry's capital.
The Financial Times commented that the tough new dividend policy makes it less likely that existing shareholders in RBS, Lloyds TSB and HBOS will take the opportunity to buy back some of the ordinary shares that the three banks are placing with the government .
Therefore if existing shareholders do not buy back any shares, the government is likely to end up with a controlling stake of around 60% in RBS and 43% of the combined Lloyds TSB and HBOS, which are pressing ahead with their merger after revising the terms of the deal by cutting the price.
The FT said RBS is the largest bank to be nationalized in Europe, where leaders from 15 countries met Sunday night to guarantee refinancing and use state money to prevent more lenders from going under.
HSBC Holdings, Britain's biggest bank, and Abbey National, a unit of Spain's Banco Santander SA, said last week they have sufficient resources and won't participate in the government recapitalization plan.
Santander is adding 1 billion pounds to its UK banks, which include Abbey, Alliance and Leicester and the deposits and branches of Bradford and Bingley.
Barclays said it won't pay a final dividend for this financial year and directors said that the company "expects that the additional capital will be raised from investors without calling on the Government funding which has been offered to U.K. banks.''
