World's economic leaders look to avert crises

One recommendation is to have banks, securities firms and other financial institutions disclose their holdings of risky securities, such as those backed by subprime mortgages given to people with tarnished credit. Those subprime mortgages, which soured with the collapse of the U.S. housing market, were at the heart of the U.S. crisis.

Another involves having credit rating agencies distinguish the ratings they give for regular securities, such as corporate bonds, from those they assign to more complex investments. These agencies have been criticized for contributing to the problems by not accurately assigning risk to mortgage-backed investments.

Yet another recommendation would strengthen supervisors’ guidance to banks for dealing with cash crunches and having banks run “stress tests” to see how they cope under different scenarios of financial strain.

The plan also calls for the Basel Committee on Banking Supervision, an international body of regulators, to make sure banks have enough capital to cover any potential losses.

The G7 officials were meeting at a time when the value of the U.S. dollar was hitting record lows against the euro and has fallen sharply against Japan’s yen.

“There have been at time sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,” the G7 statement said, pledging to closely monitor the situation and “cooperate as appropriate.”

Ongoing efforts by the U.S., backed by the G7, to prod China to let its currency rise in value also were discussed. China’s undervalued currency has been blamed for contributing to the United States’ swollen trade deficit and the loss of millions of factory jobs. The G7 officials welcomed progress that Beijing has made on the currency front but said the country needs to move more quickly to let its currency rise in value.

Soaring oil prices also are complicating the global outlook.

In the United States, high energy prices are acting as a double-edged sword: they are causing people to spend less on other things, thus adding another drag on growth. And, they increase the risks of an inflation flare-up as other companies boost their prices in response. U.S. gasoline prices hit another record Friday of $3.365 a gallon, according to AAA and the Oil Price Information Service.

The G-7 finance officials had a dinner scheduled for Friday night that was to include executives of some of the world’s biggest financial companies. The idea: Look at the causes and consequences of the recent financial turmoil. Officials invited to those talks included top executives of Citigroup, Deutsche Bank, Barclays, Credit Suisse, Lehman Brothers and Morgan Stanley.

MORE FROM STOCKS & ECONOMY

Stocks & economy Section Front

Black workers' crisis may linger after upturn   Stocks fall amid worries about spending Dubai says Dubai World is on its own Mideast markets nosedive amid Dubai woes Gas prices rise 80 cents from year-ago levels Lessons from ‘80s don’t bode well for economy Bernanke’s case to keep Congress out of Fed U.S. to lean on mortgage companies Jobs, spending data hint at recovery New-home sales rise to highest level in a year Stocks & economy Section Front   Add Stocks & economy headlines to your news reader: