The UK Government could potentially create a £20bn (€25bn) bailout fund to rescue toxic residential mortgage-backed securities from domestic banks’ balance sheets, effectively mimicking the US Treasury’s plan to prop up the banking system by acquiring troubled assets.

In research note from Deutsche Bank, its analysts said today should the UK Government go-ahead with a plan similar to the US Treasury’s, it would cost about £20bn to rescue 75% of the £26bn worth of outstanding UK non-prime, residential mortgage-backed securities.