The BBC's Robert Peston describes the climate for banking shares

Shares in major UK banks have fallen sharply amid fears more financial institutions will need to be bailed out by the government.

Barclays was worst hit, down 25%, while Royal Bank of Scotland, which is almost 60% state-owned, closed 13% lower.

Barclays has insisted that this year's profits will be "well ahead" of the £5.3bn in some pessimistic forecasts.

The bank took the unusual step of revealing some profit details - two weeks ahead of the official release.

Ban lifted

Earlier, the Irish government said it was to nationalise the Anglo Irish Bank after its funding problems continued.

US bank Citigroup suffered a big quarterly loss, while Bank of America also received a $20bn (£13.4bn) bail-out package.

Much of the fall in UK bank shares came in the last hour of trading in London, as worries grew in European markets that the latest US government rescue signalled that Washington's efforts to stabilise the financial sector were failing.

The falls came on the day the ban on short-selling, which had been imposed by the Financial Services Authority last September, expired.

"The shorting ban has been lifted and I guess the short guys have been sharpening up their tools and looking to see who they'll have a pop at next," said Numis Securities analyst James Hamilton.

Jittery mood

Barclays shares ended at 98 pence, their lowest level since 1993. The bank's shares have lost 45% of their value this week.

"We know of no justification for the fall in share price. We are fully aware of our regulatory obligations and we have not said anything," said a Barclays spokesman in a statement.

The bank then took the unusual step of giving some details of this year's profits - before they are officially published on 17 February.

"The board of Barclays expects to report profit before tax for the year, after reflecting all costs, impairment and market valuations, well ahead of the £5.3bn consensus estimate of sell-side analysts," it said in a statement.

Barclays share price graph

Meanwhile Lloyds TSB saw its shares drop 30% this week as it geared up for the finalisation of its merger with HBOS on Monday. Uncertainty about the format of a new UK government plan being worked on to boost bank lending added to a jittery mood.

Rescue options

It is understood ministers are planning an urgent bank package, which could pave the way for more taxpayer money to be pumped into the sector to offset losses on soaring bad debts.

Possible options could include fresh capital injections into banks or more government guarantees on toxic assets.

A plan could come as early as next week, with state guarantees to get credit moving again high on the agenda.

Referring to the current talks between the Treasury and the banks with the view to encouraging them to lend more money, Manus Cranny at MF Global Spreads said: "Barclays equity holders are disadvantaged because they are outside the government's planned financial support package.

"Why not just nationalise these banks and be done with it? Until that happens you can't force the banks to lend."

David Buik of BGC Partners said: "It has become obvious that the banking sector needs more capital globally."

Commenting on Barclays and HSBC, which have so far decided not to take government aid, he said in the end they may have little choice.

"I suspect they will have difficulty raising further private capital in this climate if they need it," he said.

US bail-outs

Across the Atlantic, the bail-out of Bank of America was aimed at helping it absorb losses from the takeover this month of struggling rival Merrill Lynch.

Royal Bank of Scotland share price graph

The handout will also see the firm offered guarantees against losses on up to $118bn in troubled assets.

The US government will take a stake in the bank in return for the aid, which comes on top of the $25bn handed to the group in last October's series of bank bail-outs.

Citigroup had already received $45bn in government loans and benefited from a state pledge to guarantee about $300bn in mortgages and other assets.

Citi has announced it now plans to split into two companies. One business, Citicorp, will do traditional banking, and the other, Citi Holdings, will hold the company's riskier assets.

Russian Prime Minister Vladimir Putin, 15 January
Mr Putin has been trying to form a Russian-EU gas transit consortium

The prime ministers of Russia and Ukraine are to meet in Moscow in an effort to end the dispute disrupting supplies of Russian gas to Europe.

However, there are sharp divisions within Ukraine over whether to link transit supplies to supplies for Ukraine itself at the negotiations.

The EU has urged Russia and Ukraine to prove they are "credible" partners and said it was their "last chance".

A bid to hold a Moscow gas summit on the same day appears to be floundering.

Some central and east European states have been reduced to rationing gas.

Others have been seeking alternatives to the pipelines carrying Russian gas via Ukraine.

Russia ceased supplies of gas to Ukraine on 1 January after talks on the price Kiev should pay in 2009 collapsed.

On 7 January, it stopped deliveries to Europe via Ukraine, saying it was forced to do so because Kiev was stealing the gas.

Ukrainian officials deny the allegation and accuse Russia of provoking the crisis.

Almost 20 countries in Europe have been affected by what is the worst energy crisis the EU has ever faced, the BBC's Richard Galpin reports from Moscow.

Rival positions

Russian Prime Minister Vladimir Putin, fresh from a visit to Germany, one of Moscow's biggest gas clients, is due to meet his Ukrainian counterpart, Yulia Tymoshenko, on Saturday afternoon.

Ukrainian demonstrators outside the Russian embassy in Kiev, 15 January
Ukrainians burn a poster of Mr Putin as a Golem figure turning off a gas pipe

Mr Putin said on Friday that a deal to end the gas crisis could be nearer after he discussed the formation of a gas transit consortium.

He said a deal was being brokered between Russia's Gazprom and EU firms to cover part of the cost of pumping gas from Russia to Europe.

It is not clear whether Ukraine would accept such a deal.

Ukrainian President Viktor Yushchenko has said that the issue of renewing Russian gas supplies to Europe was linked to finalising the 2009 supply contract for Ukraine but Mrs Tymoshenko, his political rival, argued the two issues were not connected.

"The issue of natural gas supplies to Ukraine and the issue of transit are interlinked and must be discussed as a single package," Mr Yushchenko's office said on the eve of the Moscow talks.

Speaking the same day, Mrs Tymoshenko said: "The Ukrainian government does not link the issue of concluding an agreement on [Russian] gas supplies to Ukraine with the issue of resuming gas transit to Europe."

Such a link, she added, would be "groundless and unfair".

She also demanded that Ukraine speak with one voice in the negotiations.

"Simply speaking, I need two things: Don't throw a spoke in the wheel and don't stab any backs," she said in Kiev.

'Last chance'

Russian President Dmitry Medvedev has invited EU leaders to an emergency gas summit on Saturday but it appears that only envoys will be sent, including EU Energy Commissioner Andries Pielbags.

Russian demonstrators outside the Ukrainian embassy in Moscow, 16 January
"Yushchenko for the chop" - a slogan at a rally in Moscow

Russian Foreign Minister Sergei Lavrov was scathing about the decision not to send EU heads of state.

"We expect anyone interested in resolving the problem as soon as possible to come to the summit being held in Moscow tomorrow," he said on Friday.

He urged the EU to "show its famous solidarity" and put pressure on Ukraine.

The European Commission has warned that the meeting is a last chance for the two countries to prove they are serious about finding a solution to the dispute.

EU states import a quarter of their gas from Russia and 80% of supplies come via Ukraine.

"The European Commission believes that the meetings in coming days offer the last and best chance for Russia and Ukraine to demonstrate they are serious about resolving this dispute," Commission spokesman Johannes Laitenberger said.

"The gas must flow. We will regard this period as a test case for judging whether or not they are credible partners."

The US Airways plane in the Hudson River. Photo: 16 January 2009
The stricken plane is currently tethered to a pier in Manhattan

Divers in New York are searching for both engines of an airliner which crashed in the Hudson River.

They are using sonar to locate the engines which are believed to have detached after the US Airways Airbus A320 hit the water on Thursday.

Officials are also planning to lift the aircraft from the river on Saturday and recover the flight recorders.

New York mayor Michael Bloomberg hailed the pilot, who landed the plane in the Hudson with no loss of life, as a hero.

Mr Bloomberg said he would be giving "incredibly brave" Captain Chesley Sullenberger and his crew the keys to the city.

National Transportation Safety Board spokeswoman Kitty Higgins

The mayor also honoured rescuers who pulled all 155 passengers and crew to safety from icy waters.

Capt Sullenberger said earlier that the crash was caused by birds flying into the engines. Investigators say they plan to interview him on Saturday.

One person suffered two broken legs in the crash and paramedics treated 78 patients, most for minor injuries.

Focus on 'black boxes'

At a briefing in New York on Friday, National Transportation Safety Board spokeswoman Kitty Higgins said divers and sonar were tracking the course of the plane which plunged in the river just minutes after taking off from LaGuardia airport.

Map of incident
1 1526 local time (2026 GMT): Flight 1549 takes off from LaGuardia airport
2 1527 (2027 GMT): Pilot Chesley Sullenberger reports birds hitting engines
3 1528 (2028 GMT): Pilot told to land at Teterboro airfield
4 1531 (2031 GMT): Pilot ditches plane in Hudson River

She said rescuers planned to start lifting the plane - which is currently tethered to a pier in Manhattan - on Saturday morning.

A giant crane and a barge have already been brought to pull the stricken airliner.

The plane is still intact, but officials say they will need to ensure it is recovered safely and without causing it to break apart.

The investigation is then expected to focus on recovering the flight recorders to help establish the cause of the crash.


Mr Bloomberg said on Friday that Capt Sullenberger had been "incredibly skilful" but would be unable to speak to the media while investigations were continuing.

The mayor said writer Ernest Hemingway defined heroism as "grace under pressure".

"I think it's fair to say that Captain Sullenberger displayed that yesterday. His brave actions have inspired millions of people in this city and millions more around the world," he said.

The mayor also presented awards to other uniformed and civilian personnel involved in the rescue, describing them as the city's "finest and bravest".

"Because of their efforts and the calm, steady leadership shown by the plane's pilot and crew, miraculously all 155 people on that plane made it to safety," he said.

President George W Bush had telephoned Capt Sullenberger to thank him for his actions, the White House said.

Bird strike

Passengers and eyewitnesses have been speaking to the media about their experiences.

"I heard an explosion, and I saw flames coming from the left wing, and I thought, 'this isn't good'," said passenger Dave Sanderson.

"Then it was just controlled chaos. People started running up the aisle. People were getting shoved out of the way."

Another passenger, Billy Campbell, described water rushing into the plane as flight attendants did "a wonderful job" of evacuating everyone.

"It's good to be alive today," said Martin Sosa, a father who had been travelling with two young children and his wife.

After crashing on the water, the plane was pulled rapidly down the river, until it was guided to a halt by tug boats against a pier.

The temperature was almost -7C (19F) and the current in the Hudson was running rapidly.

Ferryboats arrived within minutes of the crash to begin the rescue as passengers emerged in life jackets.