The European Central Bank's cash injection met with strong demand
The European Central Bank (ECB) has injected 30bn euros ($42.5bn; £23bn) into the markets, to calm jitters after Lehman Brothers filed for bankruptcy.
In a similar move, the Bank of England has made £5bn available for UK lenders.
Both initiatives met with strong demand, with banks seeking three times the funds available from the ECB.
The ECB made the move after the US Treasury said it would take the necessary steps to maintain stability in the financial system.
"I am committed to working with regulators and policymakers...to take necessary and appropriate steps to maintain the stability and orderliness of our financial markets," said Henry Paulson, US Treasury Secretary.
"I am confident in the resilience of our capital markets," he added.
ECB head Jean Claude-Trichet said: "We have to be extraordinarily alert... it is an ongoing correction with episodes of high levels of volatility."
The Bank of England said it had made the move in "response to conditions in the short-term money markets".
Lehman Brothers, a stalwart of the finance community, filed for bankruptcy on Monday after failing to find a buyer over the weekend.
The firm reported a $3.9bn quarterly loss on Friday, stemming from mortgage-related bad debts.
Also adding to market uncertainty on Monday was the news that Bank of America would acquire Merrill Lynch in a deal worth $50bn.
And in addition, reports that insurance firm AIG has sought an emergency government bailout have compounded jitters.
Certain traders argue there will be more such injections in coming days to reassure investors, after the ECB pledged to contribute to "orderly conditions in the euro money markets."
"This is going to set the tone for the next few days so I think we can expect to see more fine tuning this week," said one trader in London.
The funds provided by the ECB were at an interest rate of 4.39%. Banks had sought 90.27bn euros in total.