WASHINGTON, Oct 11: The International Monetary Fund warned on Saturday that debt-ridden banks were pushing the global financial system to the brink of meltdown and rich nations had so far failed to restore confidence.

The United States appealed for patience as world leaders raced to stabilise financial markets and avert the deepest global recession in decades, but the IMF said more steps would be needed in the coming months.

“Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown,” IMF chief Dominique Strauss-Kahn said.

President George W. Bush huddled with Group of Seven economic chiefs and officials from the IMF and World Bank, and said top industrial nations grasped the gravity of the crisis and would work together to solve it.

“I’m confident that the world’s major economies can overcome the challenges we face,” Bush said, adding that Washington was working as fast as possible to implement a $700 billion financial bailout package approved a week ago.

“The benefits will not be realised overnight, but as these actions take effect, they will help restore stability to our markets and confidence to our financial institutions.”

Confidence has been in short supply and panic has swept through global markets, driving stocks to a five-year low on Friday and prompting banks to hoard cash. That has choked off lending to businesses and households, threatening to turn a global economic slowdown into a dangerously deep recession.

US Treasury Secretary Henry Paulson said risks to the global economy were “the most serious and challenging in recent memory”.

The world’s rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no specifics on a collective course of action to avert the recession threat.

In a surprisingly brief statement after a three-and-a-half-hour meeting, the G7 stopped short of backing a British plan to guarantee lending between banks, something many on Wall Street saw as vital to ending growing market panic.

Kenneth Rogoff, a Harvard University professor and former IMF chief economist, said the G7 would have been better served adopting some version of the British plan so that banks would feel confident enough to loosen their grip on lending.

“Saying that they’ll take all steps necessary leaves hanging the question of whether they know what is best and necessary,” he told Reuters. “It was a signature moment for the G7. I think markets are going to be very disappointed.”

European Central Bank President Jean-Claude Trichet said markets needed time to digest a series of dramatic steps taken by world central banks in recent days.—Reuters