The Bank of England yesterday pledged to pump £40bn of longer-term money into the markets as banks across the world continued to come under pressure, with HSBC axing 1100 positions and Artemis Investment Management's owner Fortis planning to sell assets.

The Old Lady of Threadneedle Street is auctioning £40bn of funds with three-month maturity this Monday in a co-ordinated action with the European Central Bank, which is offering up to 24bn in relief funds to the eurozone each week, and the Swiss National Bank.

They are attempting to offset a fresh wave of suspicion surrounding the world's financial institutions that has stopped them lending to each other for any prolonged period at anything other than extremely high rates, sending mortgage interest levels soaring.

The Bank of England will follow up with another auction on Tuesday, October 7, with further ones considered for the future. The announcement means a return to the auctions the Bank conducted in December 2007 and January 2008, and repeated in March and April.

These ceased after the Bank launched its Special Liquidity Scheme which offers three-year funding to banks but is due to close on October 21.

The scheme announced yesterday is four times larger than the £10bn offered under the auctions earlier this year. Crucially, the Bank has agreed to again accept an expanded range of collateral, including credit card and AAA-rated UK and European mortgage debt, which banks are finding impossible to sell in the market, in return for funding.

Andrew Gray, banking advisory leader at accountant PricewaterhouseCoopers, said yesterday the move will "have a significant beneficial impact". But not all observers are convinced.

Merrill Lynch UK economist Nick Bate said that previous schemes had done little to improve the amounts banks pay for funding.

He said: "It is clear that tensions in financial institutions have got a lot worse over the last couple of weeks and they were pretty bad even before that."

One gauge of banks' willingness to lend to each other is the difference between the London Interbank Offered Rate (Libor), which shows what banks charge each other for loans, and Overnight Index Swap (OIS) rates, which represent anticipated central bank rates.

The spread of three-month sterling Libor over OIS eased slightly yesterday by five basis points to 150 basis points. But in dollar and euro terms it hit record highs of 202 and 97 basis points respectively.

Belgian-Dutch bank Fortis was yesterday forced to deny it was facing a funding crisis after revealing it is to sell billions of euros' worth of assets.

It said it is in talks to sell assets that would raise 5bn to 10bn. It said more than 10 deals have been earmarked in its banking and insurance businesses.

It has also agreed to sell half its asset management arm to China's Ping An, but is awaiting Chinese regulatory approval.

The bank, whose shares fell more than 20% yesterday, has already said it intends to sell Edinburgh-based fund manager Artemis, which it acquired as part of a takeover of ABN Amro led by Royal Bank of Scotland last year.

The economic conditions have also hit HSBC, which revealed yesterday it is axing 1100 positions in its global banking and markets investment banking division - some 4% of the workforce - although 500 of these are thought to be people on temporary contracts. Some 500 jobs will go in the UK, focused on its Canary Wharf headquarters. The division does not have any operations in Scotland.

Meanwhile, business group the Confederation of British Industry warned policy- makers not to introduce further rules restricting financial services companies.

CBI deputy director- general John Cridland said: "The usual reaction of politicians in these situations is to miss the target by spreading their action over a broader range of business, which has a series of unintended con-sequences. In our view, policymakers need to pause."