Alistair Darling has said he is willing to take "some pretty big steps" to help stabilise the banking system as he faces opposition calls for more action.
The chancellor, who is expected to update MPs on the financial crisis on Monday as Parliament returns, said he was looking at a "range of proposals".
The Conservatives said the government should consider taking stakes in banks.
The Lib Dems said Mr Darling must urge the Bank of England to cut interest rates, something he has rejected.
Statement to MPs
Mr Darling welcomed cross-party support but said it was vital for the Bank of England to remain free from political interference.
Mr Darling is expected to make a statement to MPs on the financial crisis at the first parliamentary session after the summer recessThe government is putting forward legislation in the coming days to give the authorities enhanced powers to support troubled banks.
Mr Darling said he would consider a raft of other measures as the government tried to prevent the situation from deteriorating further.
"Be in no doubt we will do whatever it takes to stabilise the banking system," Mr Darling told the BBC One's Andrew Marr Show, adding this was "critical to support business and jobs". We are looking at some pretty big steps which we would not take in ordinary times but we are ready to take them," he added.
At a meeting with other European leaders on Saturday, Gordon Brown ruled out a US-style bail-out of banks across Europe.
Mr Darling said the government would continue to support the banking sector in general and was ready to step in to help individual institutions when needed.
Ministers have already nationalised two leading mortgage lenders, Northern Rock and Bradford & Bingley, and facilitated Lloyds TSB's planned takeover of HBOS.
They have also supported the Bank of England's efforts to stimulate lending between banks by pumping billions of pounds into the money markets, including an additional £40bn due later this week.
Mr Darling defended the government's new emergency decision-making committee - the National Economic Council, which meets for the first time on Monday - from criticism it would be a talking shop.
But opposition parties have called on the government to do much more to help restore confidence to the banking system and limit the impact of the credit crunch on the wider economy.
'Economic disaster'
Despite saying there were "plenty of opportunities" for the main parties to work together, shadow chancellor George Osborne said more decisive action may be needed to help banks back to health.
The government may need to follow the lead of Sweden in the 1990s and buy stakes in a host of banks to shore up their finances.
"The ad hoc approach is coming to an end and we need to look at much bigger solutions," he said.
"We stand here willing to talk to the government about this but at the moment Gordon Brown's approach which is 'look I'm going to deal with this on a case by case basis', is running out of road."
David Cameron restated this position later on Sunday, saying it might be necessary for the government to offer across-the-board support to the banking sector if market conditions did not improve soon.
Lib Dem treasury spokesman Vince Cable said the economy was on the "edge of a cliff" and urged Mr Darling to put pressure on the Bank of England to lower interest rates to help businesses and consumers.
He said a "temporary" change in the bank's remit to allow it to prioritise growth over inflation may be warranted.
"We are on the cusp of a major economic disaster coming out of a financial disaster," he said.
New business secretary Peter Mandelson told Sky News the current financial situation was "very bad" and recovery would have to happen in three stages.
Likening the system to a sickly patient, he said the first priority was to stabilise it, boosting "confidence and trust" by increasing the liquidity available to banks.
Further steps must be taken, he said.
"You have to treat the symptoms [of the crisis]. Then you have to restore the patient to health and make sure what we are seeing now does not happen again."
The chancellor, who is expected to update MPs on the financial crisis on Monday as Parliament returns, said he was looking at a "range of proposals".
The Conservatives said the government should consider taking stakes in banks.
The Lib Dems said Mr Darling must urge the Bank of England to cut interest rates, something he has rejected.
Statement to MPs
Mr Darling welcomed cross-party support but said it was vital for the Bank of England to remain free from political interference.
Mr Darling is expected to make a statement to MPs on the financial crisis at the first parliamentary session after the summer recessThe government is putting forward legislation in the coming days to give the authorities enhanced powers to support troubled banks.
Mr Darling said he would consider a raft of other measures as the government tried to prevent the situation from deteriorating further.
"Be in no doubt we will do whatever it takes to stabilise the banking system," Mr Darling told the BBC One's Andrew Marr Show, adding this was "critical to support business and jobs". We are looking at some pretty big steps which we would not take in ordinary times but we are ready to take them," he added.
At a meeting with other European leaders on Saturday, Gordon Brown ruled out a US-style bail-out of banks across Europe.
Mr Darling said the government would continue to support the banking sector in general and was ready to step in to help individual institutions when needed.
Ministers have already nationalised two leading mortgage lenders, Northern Rock and Bradford & Bingley, and facilitated Lloyds TSB's planned takeover of HBOS.
They have also supported the Bank of England's efforts to stimulate lending between banks by pumping billions of pounds into the money markets, including an additional £40bn due later this week.
Mr Darling defended the government's new emergency decision-making committee - the National Economic Council, which meets for the first time on Monday - from criticism it would be a talking shop.
But opposition parties have called on the government to do much more to help restore confidence to the banking system and limit the impact of the credit crunch on the wider economy.
'Economic disaster'
Despite saying there were "plenty of opportunities" for the main parties to work together, shadow chancellor George Osborne said more decisive action may be needed to help banks back to health.
The government may need to follow the lead of Sweden in the 1990s and buy stakes in a host of banks to shore up their finances.
"The ad hoc approach is coming to an end and we need to look at much bigger solutions," he said.
"We stand here willing to talk to the government about this but at the moment Gordon Brown's approach which is 'look I'm going to deal with this on a case by case basis', is running out of road."
David Cameron restated this position later on Sunday, saying it might be necessary for the government to offer across-the-board support to the banking sector if market conditions did not improve soon.
Lib Dem treasury spokesman Vince Cable said the economy was on the "edge of a cliff" and urged Mr Darling to put pressure on the Bank of England to lower interest rates to help businesses and consumers.
He said a "temporary" change in the bank's remit to allow it to prioritise growth over inflation may be warranted.
"We are on the cusp of a major economic disaster coming out of a financial disaster," he said.
New business secretary Peter Mandelson told Sky News the current financial situation was "very bad" and recovery would have to happen in three stages.
Likening the system to a sickly patient, he said the first priority was to stabilise it, boosting "confidence and trust" by increasing the liquidity available to banks.
Further steps must be taken, he said.
"You have to treat the symptoms [of the crisis]. Then you have to restore the patient to health and make sure what we are seeing now does not happen again."
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