The Taoiseach has warned that the financial system still faces liquidity problems despite his Government's €400bn guarantee scheme.

Brian Cowen told the Dáil this afternoon that the process of finalising details of the plan was at an advanced stage.

Mr Cowen has answering questions from Enda Kenny, who wanted to know whether the scheme would take account of the impact of bad property debts on financial institutions.

The Taoiseach said the situation was still evolving but details of the scheme were at an advanced stage.

The issue had been the liquidity available to the banks, which had not drastically improved since - we are not out of the woods yet, Mr Cowen warned.

Pressed on how the scheme would operate he told the Fine Gael leader it would not be exactly the same for each institution involved but would reflect the commercial realities as they applied.

There had been speculation that the detailed plan would be agreed by ministers at a special Cabinet meeting but as things stand it seems final approval is some way off.

A special Cabinet meeting to discuss next week's Budget was held this evening.

The proposed guarantee scheme for bank deposits and loans was also discussed at the three-and-a-half hour meeting.

A further meeting is planned for 1 pm tomorrow.

Meanwhile, Britain was preparing its own bank rescue package this evening.

The Chancellor of the Exchequer, Alistair Darling, will announce the details before markets open tomorrow morning.

Irish Nationwide fined over email

The Financial Regulator has fined the Irish Nationwide Building Society €50,000 after it circulated an e-mail which breached the Regulator's consumer protection code.

The e-mail, sent by the son of CEO Michael Fingleton, was seeking deposit business in Britain on the strength of the Government's move to guarantee deposits in the Irish banking system.

The financial watchdog said that Irish Nationwide failed to 'act professionally and with due regard to the integrity of the market'.

In another development, EU finance ministers have agreed to increase the guarantee for bank customers' savings accounts to at least €50,000.

The ministers have been meeting in Luxembourg to discuss their response to the continuing global banking crisis.

Eurozone chief Jean-Claude Juncker said that European states will not allow any financial institution of systemic significance to fail.

Earlier Mr Lenihan said he was satisfied that he can reach agreement with the European Commission on the guarantee scheme.

The commission had raised concerns about aspects of the scheme possibly being in breach of EU competition and state aid rules.

Last night, the minister met European Commissioner for Competition Neelie Kroes in Luxembourg.

He said the meeting helped clarify the Government's intentions on how the bank guarantee legislation will be implemented.

The commission raised the possibility of discrimination between different banks operating in Ireland and the minister said he is addressing that issue.

Mr Lenihan and Ms Kroes agreed that these issues should be analysed by reference to the position of such banks in the Irish economy.

They also agreed that steps would be taken to guard against undue distortions in financial flows and the minister said the implementing measures will provide for both behavioural controls and quantitative balance sheet controls.