Bankers urge G20 to quickly exit private sector

WASHINGTON (Reuters) - A lobby group of powerful bankers on Monday urged G20 governments to back off from the private sector as soon as the financial crisis permits.

"Financial systems should be restored to a private sector footing, to operate on a competitive market basis, as soon as circumstances allow," the Institute of International Finance said in an open letter to U.S. President George W. Bush.

Group of 20 leaders gather in Washington on Saturday for a summit hosted by Bush to confront a credit crisis that has put the global economy at risk.

"It is crucial for policymakers to take additional coordinated steps to foster further recovery in financial markets and to avert a severe global recession." the IIF said.

It also said that more interest rate cuts and fiscal stimulus would be welcome. Central banks around the world have slashed official borrowing costs and China on Sunday announced a $586 billion package of measures to boost growth and jobs.

The IIF also acknowledged that the crisis, sparked by massive losses on bad bets on the U.S. housing markets, demands action by the financial firms at the heart of the system.

"The private sector must strengthen business practices and restore sound and responsible banking, the IIF said.

(Reporting by Alister Bull; Editing by James Dalgleish)