UK wants to work with U.S. to ease market turmoil

LONDON (Reuters) - Britain wants to work in tandem with the United States to create a common policy on tackling the credit crunch ahead of meetings of leading financial powers next month, the British government said on Monday.

The Financial Times reported that a working group was being established between the two nations to sketch out the best way to tackle financial market turmoil which has raised the spectre of a worldwide economic downturn this year.

"We're very clear that we want to work closer with the U.S. and our other major international partners in dealing with the global financial turbulence," a spokesman for Prime Minister Gordon Brown told reporters.

"This is a global issue that requires a global response."

The G7 group of leading industrialised nations, the International Monetary Fund and the World Bank are all set to hold summits in April.

Finance ministers from rich nations have come under increasing pressure to develop a co-ordinated plan to calm market nerves and establish a regulatory framework to shore up the financial system and avoid a repeat of the credit crisis.

Bank of England Governor Mervyn King said on Monday it was likely that banks will be required in the long term to "hold more capital and a greater quantity of liquid assets than hitherto".

Credit ratings agencies and financial market transparency are also likely to come under the spotlight under any joint action at G7 level.

(Reporting by David Clarke and Matt Falloon; Editing by Gerrard Raven)