Lenders are seeking more funds from the Bank of England, which was originally expected to make £50billion available as part of its special liquidity scheme which was introduced at the end of last month.
Banks in the UK have been given the opportunity to swap risky assets worth between £80billion and £90billion for safe Government bonds through the Bank's scheme.
The Financial Times reports that banks are looking to exchange almost double the level of mortgage-backed assets with the Treasury. However, it is not yet clear whether the Bank of England will make the additional funds available, although it did not reveal the exact figure to be made available when the scheme was launched.
It is hoped that the scheme will put some liquidity back into the struggling UK mortgage
market. Banks have been reluctant to lend to each other because of increasingly tight conditions caused by the credit crunch.
For a six-month period which started on April 21, banks can take advantage of the asset swapping scheme and exchanges will initially last for one year. They may be able to extend this to a maximum of three years, subject to Bank of England approval, at which point the scheme will be closed.
Meanwhile, there are rumours that Barclays may be contemplating a capital rights issue, having written down a further £1billion in credit market assets. The bank had previously written down £1.6billion and is expecting first quarter profits to be lower than those recorded in the same period last year.
Chief executive, John Varley, said the bank did not need to raise capital but that it "shouldn't take any options off the table".
Bradford and Bingley revealed yesterday that it would also follow in the footsteps of RBS and HBOS by pursuing a rights issue. Despite previous denials that it would take that course of action, the buy-to-let mortgage specialist has issued a £300million cash call.