Updated with market close information and analysts' comments.

NEW YORK (

TheStreet

) -- Shares of major financial names rose sharply on Wednesday, following the Federal Reserve's announcement of

strong unified actions

to "ease strains in financial markets."

The central banks' agreement to ""lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate

would be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points," had the effect of narrowing the spread between the average overnight borrowing rate for European banks to roughly 80 basis points higher than the rate enjoyed by U.S. banks from 102 basis points, according to Morgan Stanley interest rate strategist Jonathan Marymor, who said the investment bank had "hypothesized that this would be a logical action by the Fed since September."

China's central bank also made a surprise move to free up liquidity, cutting its reserve ratio requirement for commercial banks by 50 basis points, to 21% from a record high of 21.5%.

The Dow Jones Industrial average was up nearly 500 points. The

KBW Bank Index

(I:BKX)

was up over 7% to close at 38.19, with all 24 component stocks showing early gains of more than 4.5%.

The winner among major U.S. banks was

Regions Financial

(RF) - Get Report

, with shares rising 14.5% to close at $4.11. Regions has been an especially volatile name, in part because the company owes $3.5 billion in federal bailout funds received in 2008 through the Troubled Assets Relief Program, or TARP.

Shares of

Morgan Stanley

(MS) - Get Report

rose 11% to close at $14.79.

American International Group

(AIG) - Get Report

was up 10% to close at $23.31.

Citigroup

(C) - Get Report

rose 9% to close at $27.48.

Large U.S. banks seeing 8% gains on Wednesday included

Bank of New York Mellon

(BK) - Get Report

, which closed at $19.46; ;

Capital One

(COF) - Get Report

, at $44.66;

Fifth Third Bancorp

(FITB) - Get Report

, at $12.09;

Huntington Bancshares

(HBAN) - Get Report

, at $5.25;

JPMorgan Chase

(JPM) - Get Report

, at $30.97; and

State Street

(STT) - Get Report

, at $39.61.

Big U.S. banks seeing 7% gains included

Bank of America

(BAC) - Get Report

, closing at $5.44;

BB&T

(BBT) - Get Report

, at $23.17;

M&T Bank

(MTB) - Get Report

, at $72.98;

PNC Financial Services Group

(PNC) - Get Report

, at $54.21; and Wells Fargo, which closed at $25.86.

Major European banks saw strong gains in U.S. trading with shares of

Deutsche Bank

(DB) - Get Report

rising 11% to close at $39.28,while

ING Groep

(ING) - Get Report

was up 9% to close at $7.82 and

Credit Suisse

(CS) - Get Report

was up 8%, closing at $24.21.

KBW analyst Frederick Cannon said in a report that although the central banks' liquidity action "should relieve the immediate pressure in European short term credit markets, supporting a rally in the equity markets," the move didn't "address the larger issues of sovereign and bank solvency in Europe and does not imply that the Germans are yet ready to support ECB quantitative easing."

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--

Written by Philip van Doorn in Jupiter, Fla.

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Philip van Doorn

.

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http://twitter.com/PhilipvanDoorn

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.