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Five of Western civilisation's largest banks, including the Bank of England, have joined forces to take action over the ongoing global credit crunch.

The United States' Federal Reserve, the Bank of Canada, the European Central Bank and the Swiss National Bank have all jointly announced the action alongside England's top financial institution.

In order to ease the financial pressures caused by the subprime lending market in the US, the Federal Reserve is to auction off term funds intended to bail out certain lending institutions certified as "in generally sound financial condition".

These auctions will enable the Federal Reserve, in conjunction with the other four central banks, to inject up to $40 billion (£19.5 billion) in the world loans market in order to force interest rates down and stabilise financial centres.

The problems on the world's markets mean credit is difficult to obtain for banks, who fear a similar stigma to that attached to Northern Rock.

A run on the British bank – the first in almost 150 years – began in September as savers rushed to withdraw money after it was announced that the institution had been forced to accept an emergency loan from the Bank of England.

Further problems have been predicted for other lenders if the tightening credit conditions continue and a world recession could follow.

The Federal Reserve auctions follow a series of three rate cuts in the US in recent months, while the Bank of England has also recently cut interest rates in a bid to kickstart the credit market in the UK.

The auctions have also widened criteria for borrowing money, which it is hoped will result in more institutions borrowing money as they will not fear being tarred with the same brush as Northern Rock.

The first auctions will take place within the next week over a 28-day term, with further auctions scheduled for next month.