YESTERDAY the Bank of England threw everything, with the possible exception of the Threadneedle Street kitchen sink, at the liquidity crisis currently turning global financial markets to treacle.

Today the Royal Bank of Scotland is expected to do much the same, when it addresses as-yet-undeclared losses on its books and starts the process of rebuilding its stretched balance sheet and painfully-thin capital base.

The men behind these multi-billion fusillades have long insisted they would not be needed. Bank of England Governor Mervyn King argued that central bankers should never encourage moral hazard in markets they seek to influence, by insulating participants from the costs of their own misjudgments and misplaced risks.

Now he has launched an uncapped, three-year scheme to allow commercial banks to swap untradeable mortgage and credit card-backed securities - inventions which infested and now haunt global banking - for new-issue Treasury bills. Once they get their hands on these gilt-edged securities, so the theory goes, banks can use them as collateral to raise fresh money and start lending to each other again.

The Bank of England puts likely demand at at least £50bn. However, such is the parlous state of financial markets, King says he can envisage it topping £100bn. And since the swap will be, in the jargon, at a "haircut" of up to 22%, the central bank's - and, ultimately, the government's - exposure to the questionable paper it takes in return could amount to more than £120bn.

Sir Fred Goodwin and Sir Tom McKillop, respectively chief executive and chairman of RBS, have long insisted they were comfortable with the group's existing reserves, despite leading the £50bn-plus break-up of Dutch rival ABN-Amro and paying handsome dividends to placate shareholders spooked by a falling share price. There was no need for a rights issue, they said repeatedly.

Now they are poised to write off up to three times more than they did less than two months ago and tap shareholders for between £10bn and £12bn in new funds, through a rights issue. The long-expected sale of the Angel Trains leasing business is likely to get the green light. And RBS may even listen to offers for its Churchill and Direct Line insurance businesses.

U-turns rarely come with more billions attached. So naturally, in our blame-obsessed culture, there have been plenty of cries for heads to roll, presumably with the blushes still on their cheeks. Mervyn King has got off comparatively lightly so far. But, of course, the government has just given him a new five-year term.

Goodwin and McKillop will get a better sense of where they stand when they address shareholders at the RBS annual meeting tomorrow. It looks as if they will try to buy off their critics by promising a higher core capital target, up from around 4% now to something above 6%, and some new heavyweight independents recruited to the main RBS board.

All three - King and the RBS duo - can point to the exceptional nature of the current crisis. It is no longer a question of banks losing trust in each other because none of them know who holds the most toxic packages of sub-prime derived debt. The crisis in interbank lending is now infecting their willingness to lend to individuals and businesses. Successive falls in base rate have not shifted sentiment. Perversely, the interbank rate, Libor, has been rising.

"The situation will improve only if the overhang of illiquid assets on banks' balance sheets is dealt with," observed the Bank of England yesterday. And that requires two things: the kind of swap facility it has now announced, and a willingness by all who might try to use it to disclose their own losses in full and take steps to rebuild their own balance sheets.

While RBS - or rather its current leadership - is taking all the flak right now for signalling its U-turn early, others are almost certain to follow. HBOS and Barclays are the names on most people's lips. What will matter then is not simply how many billions are needed from shareholders or asset sales to repair financial foundations, but the credible areas of future growth towards which that re-found financial strength can be directed.

And there, RBS holds some strong cards, especially in corporate banking growth in Asia and transactional services globally. In comparison HBOS, with its heavy mortgage presence in a troubled housing market, and Barclays, the loser in the ABN break-up, may have fewer strategic options.

For the government and the Bank of England, the big risks are two-fold. The first is that normal service takes longer than the three years this lifeboat remains afloat. The other is perceptual: that, at a time when the lowest-paid workers are paying more tax because of the abolition of the 10p band, fat-cat bankers are being bailed out, yet again, for their own excesses.

The Bank of England insists the only risk of the public sector being exposed to losses from its Special Liquidity Scheme is in "the very unlikely event that a participating bank defaulted and the value of the assets it had placed as security with the Bank of England later proved inadequate to cover the value of the (relevant) Treasury bills."

Won't happen, will it? After Northern Rock, who can say never?