The Bank of England said it would pump 40 billion US dollars (£22.3bn) into money markets as part of a co-ordinated move by major central banks.
The lending by the BoE is being made in conjunction with the US Federal Reserve and alongside similar actions by the European Central Bank, Bank of Canada, Bank of Japan and the Swiss National Bank.
The Bank said: "These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets.
"The central banks will continue to work together closely and will take appropriate steps to address the ongoing pressures."
The first such lending operation has taken place and involved US dollar funds against eligible collateral.
The co-ordinated action by central banks will result in up to 180 billion US dollars (£98.7bn) being pumped into the financial system.
Financial markets have been rocked by the collapse of US investment bank Lehman Brothers, a US government-backed rescue of insurance giant AIG and the emergency takeover of HBOS.
The upheaval has caused banks to hoard cash and sent the rate at which they lend to each other soaring as financial institutions worry over potential losses.
The Bank of England said it would extend its Special Liquidity Scheme, which allows banks to strengthen their balance sheets by swapping riskier assets for Treasury bonds, until January 30. The scheme had been due to close on October 21 but the Bank has made the move "in view of the current disorderly market conditions".
As well as extending the scheme, the Bank has already pumped £25 billion extra into money markets this week to relieve cash-starved banks.
