Major central banks including the U.S. Federal Reserve coordinated interest-rate cuts on Wednesday, with South Korea and Taiwan following suit on Thursday. Japan was considering further measures in the face of new recessionary signals.

Finance ministers and central bankers from the Group of Seven major industrial nations will meet in Washington on Friday with the chance to take concerted action.

Acting piecemeal, they have rescued banks, injected massive amounts of liquidity into the markets, agreed to take toxic debt off the books of financial institutions and now, in unison, have slashed interest rates in the face of the greatest financial crisis since the Great Depression.

That has raised the question of what options remain to combat the market meltdown, which has destroyed lenders from Wall Street to Iceland to Germany and left people worried about the security of their savings and jobs.

Policy-makers want to free up credit but have yet to overcome the lack of confidence that has virtually halted lending between banks. The interbank cost of borrowing overnight cash fell on Thursday but longer-term funding costs stayed high.

“The rate cuts are a good step in the right direction to stop the bleeding, but this won’t be enough. European governments have to act swiftly and decisively together,” said Rik Zwaneveld, trader at AFS Brokers, in Amsterdam.

U.S. Treasury Secretary Henry Paulson, speaking to reporters on Wednesday, stressed that the recently approved US$700 billion financial bailout bill gave him wide authority to inject capital into the banking system, and he said he would not rule out having Treasury take an ownership position in banks if necessary.

The bank recapitalization plan was an option included in the US$700 billion rescue plan approved last week in which the U.S. Treasury will buy bad loans from financial institutions in the hope that it will jump-start lending.

Equity stakes, still in its preliminary stages, has emerged as one of the preferred options being discussed in Washington and on Wall Street, The New York Times reported, citing unnamed U.S. officials.

The United States would be following the lead of Britain, which said on Wednesday it was prepared to inject 50 billion pounds (US$87 billion) of taxpayer money into its banks and guarantee interbank lending.

After getting hammered on Wednesday, British banking shares recovered on Thursday with HBOS up 35 percent and Royal Bank of Scotland up 15 percent.

British Prime Minister Gordon Brown urged the G-7 and EU to guarantee lending between banks, in line with measures Britain has introduced domestically.

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