The Bank of England - in a move to ease the pressure on banks caught in the grip of the worldwide credit squeeze - yesterday poured more money into the financial system.

The Bank offered £13.62bn at its regular one-week open-market operation, up from £10.93bn a week ago.

Just hours after the Bank of England announcement, the Federal Reserve said it had auctioned $75bn (£37.5bn) worth of Treasury securities to big investment houses in the latest effort to ease the painful credit crisis.

Demand was high. Big investment houses had requested a total of $86.1bn of the Treasury securities, the Fed said.

Back in Europe, the Swiss National Bank offered three-month funds to promote lending and in Frankfurt, the European Central Bank promised to pump additional liquidity if needed as the quarter comes to an end.

The move by the Bank of England and the ECB to ease liquidity pressure lifted financial stocks across Europe. The London equity market's FTSE-100 blue-chip index ended up 1%, led by banking stocks.

City investors welcomed the injection of more funds into the market.

"I don't think that any one of us believes that we've heard the last of problems for (investment) houses and banks," said Les Ames, a trader at WH Ireland. "But I'm of the opinion that fewer and fewer people believe that houses are going to go to the wall." He added: "On that basis most people are a little bit happier to say the least.

"There will be a few more surprises but nothing along the lines of Northern Rock or even Bear Stearns. The US banks have had their reporting season now and if there was going to be anything really, really dramatic, they could not have hidden it," Ames added.

He was referring to the bail-out of troubled Wall Street investment house Bear Stearns by the Fed and the UK Government's decision to nationalise stricken mortgage lender Northern Rock - both victims of the global credit crunch sparked by the US sub-prime mortgage crisis.

Despite yeterday's action by the central banks, the cost of borrowing in pounds and euros rose to the highest since last year.

The three-month London interbank offered rate, or Libor, for euros increased one basis point to 4.73%, the highest level since December 27, the British Bankers' Association said. The BBA said the comparable sterling rate climbed to 6.00375% for the first time this year.

Althought the rise in the Libor rate was largely ignored by the equity markets, it created alarm at some investment banks.

"Money markets have seized up again and by some measures the funding crisis is more acute then ever before," Christoph Rieger, a fixed-income strategist in Frankfurt at Dresdner Kleinwort, wrote in a note to clients.

The Bank of England met commercial banks late last week as the credit squeeze tightened, with the cut price sale and rescue of Bear Stearns having prompted further fears over the sector.

On Wednesday, Bank Governor Mervyn King pledged further assistance in an attempt to restore waning confidence in the financial sector.

Banks are continuing to rein in their lending as financing becomes more expensive.

Nationwide's specialist lending arm The Mortgage Works yesterday became the latest group to withdraw its 100% mortgage after being swamped with business.

There are now just seven lenders who have 100% mortgages, compared with about 40 in November, with Abbey the only group willing to offer the deals without conditions, such as a parent acting as a guarantor.