Chancellor Alistair Darling came under pressure last night to guarantee all deposits in UK banks, as shares suffered their worst slump in more than 20 years.

He told MPs he would do "whatever is needed" to maintain financial stability – but his hand may be forced by unilateral action in other European capitals to reassure savers.

Germany has followed Ireland, saying it will protect its own banks, with other EU members such as Spain considering similar moves, and Italy calling for a Europe-wide bail-out.

More than £93 billion was wiped from the value of the UK's biggest firms, as the FTSE 100 suffered its biggest fall since Black Monday, 21 years ago.

It plummeted almost eight per cent, while in New York the Dow Jones Industrial Average fell below the 10,000 mark for the first time in four years.

Liberal Democrat Treasury spokesman Vince Cable, the first politician to warn of the looming stock market crash, told Mr Darling it was inevitable a full guarantee on deposits would have to be offered in the UK.

"In the wake of the apparent German decision to give a complete guarantee of all deposits in the German banking system, it seems to us that the British Government will indeed have no alternative but to give a comparable assurance to people in the British retail High Street banks."

He also said the rules governing the Bank of England should be changed to allow it to slash interest rates to help the economy.

From today deposits of up to £50,000 will be guaranteed in Britain, but there is growing pressure on the Government to go further, as Denmark and Greece already have.

The Chancellor did not hide his anger at Germany's move, which came just a day after Chancellor Angela Merkel attended a summit to co-ordinate a European response.

He told MPs: "It does demonstrate the problems that arise when member states take unilateral action because, of course, it does have a knock-on effect for other states. It does emphasise the need for us to work together.

"I think it is very important, otherwise we will end up with a situation that is confused not just to depositors, but to the institutions themselves."

The Bank of England will inject £40bn into the markets today, while the Financial Services Authority is consulting on whether further to raise the depositors guarantee.

And the Government will publish the Banking Bill today giving authorities extra powers to intervene in failing banks.