Much of the current crisis has been caused by the banks' unwillingness to lend to each other, so the government hopes that if those loans can be guaranteed then lending will resume.
"This is beginning a process of un-bunging a big problem where banks won't lend to each other for long periods," Mr Darling said.
The lenders that have confirmed their participation in aspects of the scheme are Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered.
The Treasury said that other banks and building societies would be able to apply for inclusion in the plan.
Preference shares pay a fixed rate of interest instead of a dividend, which has to be paid before other shareholders receive anything, but they do not carry voting rights.
Taxpayers may even end up making a profit from the shares, but that is by no means guaranteed.
Robert Peston said there would be strings attached for banks that take the government money.
"Taking taxpayers' money will not be a licence to trade as normal," he said.
Negotiations will take place with each participating institution that will require them to extend normal credit lines to homeowners and small businesses, in addition to rules on executive pay and dividends to other shareholders.
'Stop the panic'
It is hoped that the deal will get the money markets going again and assure the future of the banking system.
"They've got additional capital now if they want it, they've got an unlimited source of liquidity," said Terry Smith, chief executive of the money brokers, Tullett Prebon.
"That certainly should stop the panic in terms of people wondering whether or not the banks are safe."
The deal has also been welcomed by the banks.
"The government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system," HBOS said in a statement.
Barclays, Lloyds TSB and RBS also issued statements welcoming it.
HSBC, Nationwide and Standard Chartered also welcomed the plan but said they did not intend to take on any new capital at the moment.
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