Britain's second largest bank, Royal Bank of Scotland, is to ask shareholders for about £10bn of extra cash to improve its financial position.
RBS will raise the money from existing investors through by far the biggest rights issue in UK corporate history.
The global credit crunch has meant banks worldwide are keen to shore up their capital positions - and it is thought others may follow RBS's move.
RBS, owner of NatWest, Ulster Bank and insurer Direct Line, has not commented.
In a statement, it would only confirm it would give a trading update next week as planned. The update is due ahead of its annual meeting on Wednesday.
"I understand that next week they will announce a massive rights issue, that's a demand for new cash from their shareholders," said BBC business editor Robert Peston.
Our BBC correspondent has also learned that RBS will make about £5bn of write-downs when it launches its rights issue next week, a record so far for a British bank.
"This may sound like horrible news," he said but he added: "investors may well see it as a recognition that RBS has properly owned up to its past boo-boos - and they would view such catharsis as very good news".
Prudence
The rights issue is thought to be a prudent measure to provide a capital cushion for the amount of risk on its balance sheet after RBS played a leading role in last year's takeover of the Dutch bank ABN Amro.
"Having spent the best part of 70bn euros ($111bn; £56bn) last year on the biggest bank in Holland, they now have the smallest cushion relative to risk on their balance sheet of any bank in Europe," said Alex Potter, banking analyst at Collins Stewart.
Some analysts say this will anger big investors who will see it as an embarrassing U-turn from chief executive Sir Fred Goodwin's former stance.
"It is going to be pretty humiliating for the management," Simon Maughan at MF Global Securities.
"They went out there and did a big acquisition, saying they didn't have to raise equity, and now they are saying that they do. That is pretty embarrassing and I think that institutional investors will demand that heads should roll," he added.
Analysts stressed the rights issue was not something that should worry people with accounts at any RBS banks.
"This is not a customer issue, it's a shareholder issue," said Justin Urquhart Stewart from Seven Investment Management.
'Sharing pain'
Heads of many of Britain's biggest banks, including RBS, had a meeting at Downing Street on Tuesday to discuss the continuing effects of the credit crisis.
According to the BBC's Robert Peston, the Bank of England will announce a plan next week to give banks access to £50bn in government bonds in exchange for UK mortgage-backed securities to encourage banks to lend to each other again.
This in turn should ease up lending to individual borrowers.
Liberal Democrat treasury spokesman Vince Cable supported the idea of a rights issue in addition to the Bank of England's proposals.
"It's positive and it's necessary and it's got to happen for all of the big banks," he told the BBC.
"Essentially this is all about sharing pain - shareholders have got to accept that any losses arising from the credit crunch accrue to banks and not to the taxpayer."
The government and the Conservatives declined to comment.
Analysts expect other banks to follow RBS by going to the market for extra capital.
Bradford and Bingley denied widespread reports at the weekend that it was planning to raise money in the same way.
RBS shares have had a volatile day's trading, opening higher before falling and then rising again. They rose almost 5% and closed at 384 pence at the end of London trade.
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