Finance chiefs from rich nations gathered yesterday to agree on the best course to navigate beyond a credit crisis that threatens to trigger a global recession.
With fresh signs of economic distress in the US, where consumer confidence hit its lowest level since 1982, Group of Seven leaders acknowledged that global growth prospects had dimmed.
British Finance Minister Alistair Darling said officials must step up to the severity of the situation the global economy faces.
"These are uncertain times," he warned. "I want to make the case for urgent action by the world's major economies to deal with what is the biggest economic shock since the Great Depression."
Still, the finance officials stopped short of declaring that the US economy was heading for a recession, and bristled at sharp reductions in growth forecasts from the International Monetary Fund.
A special study commissioned by the G7 nations offered a detailed assessment of the banking and regulatory failures that contributed to the market turmoil that has raged for eight months. The report offered dozens of recommendations on how to shore up oversight and operations to prevent a recurrence.
The G7 - the US Canada, Britain, France, Germany, Italy and Japan - is expected to endorse the report from the Financial Stability Forum, which comprises central bankers and global regulators, when it concludes a meeting that began in mid-afternoon.
The FSF report calls for tougher capital requirements for banks to ensure that they can withstand periods of financial market stress, and urges closer international cooperation between central banks and regulators.
Financial market turmoil, which began with defaulting US subprime mortgage loans but quickly mushroomed into an international crisis, has forced central banks to flood markets with cash, and the US Federal Reserve and others have lowered interest rates to try to keep economies afloat.
A G7 source said the financial leaders would issue a "slightly more negative" assessment of the US economy. "It won't be alarmist or use the R-word," the source said, referring to the possibility of a US recession brought on by a deep housing downturn and related credit strains.
Banks have already written down some $200 billion in assets tied to souring mortgages and other loans, but analysts say they may be little more than half way through writedowns that may eventually total $1 trillion.
G7 members, notably the US and Canada, want to push bankers to match the vigor that global central banks have shown in battling the liquidity squeeze by urging these private-sector players to quickly put losses behind them and raise new capital.
A select group of bankers has been invited to a dinner yesterday night at the US Treasury Department, following the formal G7 meeting and after a G7 communique has been issued at around 6:30 p.m. (2230 GMT).
US Treasury Secretary Henry Paulson clearly stated his position on Thursday that he wants banks to be ready to play their role as a market stabilizer.
"If you think you're going to need capital, don't be looking for the government to help you," Mr Paulson said. "If you think you need capital, go raise it."
The eight-month-old crisis has reverberated through the global economy as securities cobbled together on Wall Street from bits and pieces of mortgage loans have plummeted in value, casting a pall over global economic prospects.
While the focus is clearly on financial reforms, G7 ministers were also expected to reiterate that "excess volatility and disorderly movements" in currency values are undesirable - but they were expected to stop short of expressing outright concern over recent market moves, as Europe has urged.
In the past, the G7 has also encouraged China to speed up appreciation of its yuan currency, and the pace of the yuan's rise has picked up, pushing it over 7.00 to the US dollar on Thursday for the first time in more than a decade. The G7 could nod to the rise, but likely will also urge further action.