Employees at the Royal Bank of Scotland in the Square Mile described feelings of "dread" and "despondency" in the workplace after its share value plummeted yesterday, as customers in Edinburgh expressed their concerns over the bank's security.

One investment banking intern summed up the mood of RBS employees on leaving its City of London headquarters. She said: "It is quite a dreadful feeling in there. It came as a big shock to see the fall this morning and it happened so quickly. We didn't predict that it would affect RBS to that extent.

"I think staff are worried about their jobs, but they are not showing it yet. No-one is safe."

Accountant Chris Morris, 32, said: "People are pretty despondent about everything - they are worried about whether we will be able to fund ourselves.

He added: "We haven't seen the bottom fall out yet and it is going to get a lot worse for the markets in general.

"People here are still optimistic because we have got a strong balance sheet. It's very peculiar that we are in this situation."

And an investment banker who did not want to give his name said: "I think people take it with a pinch of salt because everything is so volatile these days and it might go the other way tomorrow.

"Nobody knows what is going to happen, the drops and gains are much higher now.

"Nobody alive has seen a financial crisis like this and nobody will see it again. Nobody knows how long it will last for."

Staff at the bank's iconic Edinburgh headquarters in St Andrew's Square declined to comment on the deepening drama on the markets, but customers spoke of their concerns.

IT worker David Nelson, 31, from Edinburgh, admitted he was worried, but said he believed his money was safe.

"I think somebody's making a lot of money somewhere and it won't be me," he said.

"I'm a bit concerned but I've everything in premium bonds, which seems to be the best decision at the minute."

He added that he was actually thinking about buying shares in the bank within the next few months: "They're a good long-term investment, not maybe the best short-term at the minute but in the long-term it should be good."

Edinburgh pensioner Nora Bruce also aired her concerns but was cautiously optimistic.

The 74-year-old retired civil servant said: "You wonder if it's safe with your money in the bank but surely it will get better.

"The climate's bad. It's not just here, it's everywhere."

Neil Raeburn, 32, visited RBS to deposit money on behalf of his work at the NHS.

On the wider financial crisis, he said: "I think it's a pretty bad situation, I don't see it getting any better any time soon.

"I think a lot of people have been quite reckless in the stock market and I think that's having an influence.

"I could see a lot of people taking their money out of the banks because they're scared of what's going to happen."

Professor Gabriel Talmain, the Daniel Jack Chair of Political Economy and Director of the Centre for Economic Studies at the University of Glasgow, questioned the effectiveness of a "wholesale" bailout for Britain's banks.

"It seems to me if the majority of banks like this are under pressure then the government is going to be hard pressed to save the banking sector wholesale," he said. "I know that Alistair Darling pledged that he will do whatever it takes but basically heading towards nationalisation of a good chunk of the financial system is not necessarily a sign of stabilisation."

Mr Talmain said he was concerned that a government bailout would create a group of "zombie" banks, where the institutions were effectively bankrupt but were still able to function.

"In Britain, it could be worse than that where you would get a package of guarantees for certain banks and then these banks would be back in a position of competing. They would have a competitive advantage against those that were not part of this big rescue. They become then like vampire' banks and there is a domino effect.

"You have to be careful not to give the banks which are threatening to default this advantage. There is an important playing field out there which you cannot ignore.

"I think the government has to change from acute crisis mode to taking a deep think over what the plan should be over the long term. Some actions which are well intentioned do not always lead to a good result."

One report yesterday estimated that RBS, Lloyds and Barclays may need £15bn each to get through the downturn. Financial analysts at JP Morgan last week put the shortfall of £46bn for all UK-based banks.

Simon Pryke, head of global research at Newton Asset Management, said: "I think what this signals to me is that this isn't a situation where banks can muddle through.

"They're going to have to be recapitalised and they're going to be heavily dependent on government and the authorities for sources of funding.

"The important thing to put across is that governments are very focused on rescuing their banking systems but that doesn't necessarily mean rescuing bank shareholders."