In Europe, there’s been a new flashpoint every day this week. Today, it’s the Royal Bank of Scotland reportedly seeking a hefty chunk of a multibillion-dollar capital infusion the U.K. government is now considering. In solidarity with its troubles, RBS’s shares have attempted to build on the devastating market action seen yesterday, when the Dow closed below the key 10,000 mark. With the FTSE 100 challenging the carnage of Black Monday, England’s five largest banks watching helplessly as roughly $40 billion in combined value is wiped off their books and many wondering if the world’s financial tourniquets are not working, here’s what Old Blighty is planning to do about it.

The U.K. government may invest at least 45 billion pounds ($79 billion) in banks including Royal Bank of Scotland Group Plc and Barclays Plc to bolster capital depleted by mortgage-related losses, two people with knowledge of the situation said.

Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King met with banking chief executive officers including RBS's Fred Goodwin and Barclays's John Varley late yesterday to discuss the investment, said the people, who declined to be identified because the meeting was confidential.

RBS fell as much as 39 percent after Standard & Poor's cut the company's credit rating for the first time in almost a decade, as the Edinburgh-based bank's financial condition deteriorates. The government has already bailed out Bradford & Bingley Plc and brokered the takeover of HBOS Plc in the past month on concern about the banks' ability to fund themselves. Darling said yesterday he will do "whatever it takes" to keep the financial system stable as capital markets remain frozen.

"The equity markets are saying RBS has the biggest problem but something needs to be done across the board. Otherwise RBS concern will simply move onto Barclays, said Simon Maughan, a London-based analyst at MF Global Securities. "Bond investor confidence in the banks is completely shot."

RBS, Barclays, Lloyds TSB Group Plc and the U.K.'s three other biggest banks need to repay as much as 54 billion pounds of debt by the end of March 2009, just as borrowing costs reach record highs. The total, which includes bonds, loans and commercial paper, is triple the debt repaid in the same period a year earlier. RBS has about 11.5 billion pounds of obligations coming due in the next six months, while Barclays has 15.9 billion pounds maturing, according to data compiled by Bloomberg.

"Some sort of government guarantee is a sensible measure, which could give a sense of security for banks to start lending to each other again," said Simon Willis, a London-based analyst at NCB Stockbrokers Ltd. "We can't tell if this will be enough until we get there, but it's a good first step."

Edinburgh-based RBS fell 46.7 pence to 101.4 pence, its lowest value for 13 years, as of 10:34 a.m. in London trading. HBOS, the country's largest mortgage lender, declined 14 percent and Lloyds TSB dropped 9.8 percent. Barclays fell 8.4 percent.

"We have categorically not requested capital from the government," Barclays spokesman Alistair Smith said.

"We have our feet on the ground," John Varley said at the Merrill Lynch & Co. conference in London today in a speech. "We understand very clearly that the environment is difficult, and that it's quite likely to get more difficult as economies in the world decelerate."

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