UK banks yesterday piled into the debt market to raise new capital, with Abbey National and Lloyds TSB launching large securities issue to fund their expansion, reports the Financial Times.

The two banks have issued preferred securities, an innovative form of debt that banks may count as part of their core capital reserves, almost halving the cost of ordinary equity. Approval from banking supervisors and the Inland Revenue was won only last year, and Halifax was the first bank to tap the market with preferred securities issues in November. With strong investor demand, other banks are now expected to follow suit.