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Jason Kabel, associate director and portfolio manager, money market and fixed income for F&C Investments, said the country’s biggest lenders were being granted access to the Bank’s special liquidity fund in return for the trickling down to smaller retail banks through transactions and not being horded bolster up balances.

Mr Kabel said: “The larger lenders all charged in first, however, it is a jittery market and they were reluctant to pass on money in transactions as, at the moment, you just have no idea who is going to have problems next. It has not solved the trust issue.

“The result is the cash injection was limited in impact with only a handful of banks actually managing to lower rates. Nearly all have since gone up as it provided a floor but liquidity still remains at zero.”

A spokesman for the Bank of England said it would not comment on what organisations had called on the funds before 21 October when the drawdown facility closed but said the £50bn should trickle down throughout transactions in the banking system.

He said the larger banks were called to a meeting this year although this was widely reported and did not mean the cash injection was limited to them.

He said: “Banks can call on this facility if they see fit and are eligible and £50bn is not a set amount, going up and down as required. Of course, funds requested would be expected to trickle down through business transactions conducted across the industry.”

When asked about potential mergers on this basis, the spokesman said it was “not one for us”.

An industry insider said the Bank of England and government had attached conditions to the funds, stating bigger banks or building societies must take over or merge with smaller institutions who were struggling or deemed to be hard hit.

Such a move is reminiscent of the Fed’s policy which, together with JPMorgan, provided emergency funding to investment bank Bear Stearns in March.

He said: “By doing this, the industry is taking care of itself. We do not have a repeat of Northern Rock.

“Nationwide is due to take over two smaller building societies as a result.

“To be quite frank, no more public money can go into propping up the banking sector and this is going to become more common.”

Lucinda Devine, media manager for Nationwide, said the nation’s biggest building society never commented on rumour or speculation. She said: “We would only consider inorganic growth, such as merger and acquisition activity, where it is right for our business and our members.”

Both the British Bankers’ Association and Council of Mortgage Lenders declined to comment.

Rachel Le Brocq, the Press and Public Affairs Officer for the Building Societies Association said the industry body did not comment on speculation.

Meanwhile this week Chelsea Building Society announced it was set to merge with Catholic, which has just £44m in assets.