UK banking shares have plunged on fears that more financial institutions may need government assistance.
HBOS dropped 42%, Royal Bank of Scotland (RBS) fell 39%, Barclays shed 9% and Lloyds TSB was down 13%.
The bosses of the UK's biggest banks met Chancellor Alistair Darling to discuss financing late on Monday, BBC business editor Robert Peston said.
The Prime Minister, the chancellor and the Bank of England governor are meeting to discuss the crisis.
The chairman of the Financial Services Authority, Lord Turner, is also taking part in the talks, which will consider government proposals for stabilising the financial system and longer-term reform.
Downing Street denied it was an "emergency meeting", adding that it would focus on "ongoing action".
Barclays has categorically denied that it has requested any capital from the UK government.
RBS confirmed that the meeting with Mr Darling had taken place, but blamed the share price fall on two very large share trades taking place, which under stock market rules meant that the shares were temporarily suspended.
Lloyds TSB has declined to comment.
The Treasury said it did not comment on whether or not meetings were taking place.
Monday's meeting was attended by Mr Darling together with Mervyn King, the governor of the Bank of England, and Adair Turner, the chairman of the Financial Services Authority.
What the Irish government did, in guaranteeing both retail and wholesale deposits in their banks, may turn out to be something of a model for Europe-wide action
Representing banks were the chief executives of RBS, Barclays and Lloyds TSB.
The Treasury is understood to have been formulating a plan that would allow the government to provide extra funding to the banks in exchange for stakes in them.
The government said it would not speculate about what policy options are being considered, but repeated Mr Darling's assurances from Monday.
"As the chancellor said yesterday, we will do whatever it takes to maintain stability and support a well-functioning banking system," a Treasury spokesman said.
'Get on with it'
But some experienced politicians were convinced that there must be action this week.
"The government will inevitably have to recapitalise the banks," Geoffrey Robinson MP, and former Labour paymaster general, told the BBC.
"They really have to recapitalise them this week," agreed Sir Kenneth Clarke MP, former Conservative chancellor of the exchequer.
"Everyone knows they're going to have to do it - get on with it," he added.
Also depressing shares in RBS, which owns NatWest bank, was Monday's news that the ratings agency S&P has downgraded it, which means that the raters think it is a less safe institution to lend money to.
That is a particular problem, because it is the difficulty banks are having in borrowing money from each other that is at the root of the credit crunch.
As they have been unable to borrow from each other, the banks have been forced to borrow from the government instead, to the tune of £200bn over the past year, Robert Peston said.
It has been another tough day for banks elsewhere in Europe, with the government of Iceland taking control of the country's second-biggest bank, Landsbanki.
Landsbanki owns the internet bank Icesave, which has stopped allowing customers to withdraw money. Icesave is thought to have 350,000 customers in the UK and Netherlands.
Finance ministers meeting in Luxembourg have agreed to increase the minimum value of deposits that European countries will have to guarantee from 20,000 euros to 50,000 euros ($68,250; £38,900).
Fmr RBS Chairman Sir George Mathewson: 'Uncertainty and fear is driving the markets'
At the moment in the UK, the Financial Services Compensation Scheme (FSCS) guarantees the first £50,000, but European banks operating in the UK are guaranteed by their domestic scheme.
Some of them choose to top up the protection with the FSCS, so if Landsbanki were to fail, the first 50,000 euros would be paid by the Icelandic authorities and any more up to £50,000 would be paid by the FCSC, which would also handle all the paperwork.
All this comes the day before the Bank of England begins its latest two-day monthly interest rate-setting meeting, at which it is widely expected to cut interest rates from the current 5%.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.