Sept. 13 (Bloomberg) -- U.K. and U.S. finance ministries echoed French and German calls for a review of markets to lessen the fallout from the rout in U.S. subprime mortgages and prevent a recurrence.

In separate interviews and opinion pieces published today, U.K. Chancellor of the Exchequer Alastair Darling and two U.S. Treasury undersecretaries said the Basel-based Financial Stability Forum will propose ways to the Group of Seven nations to limit turmoil in times of financial stress.

``What we are aiming to do is ask the G-7 financial stability board to look at a number of things that we think might help,'' Darling told the Daily Telegraph. ``We need to get the G-7 to be able to tighten these things up.''

Their call for a coordinated response follows demands by the leaders of France and Germany for more light to be shed on the use of complicated credit products. The issue also tops the agenda for tomorrow's meeting of European finance ministers in Oporto, Portugal.

What began as a crisis in the market for mortgage loans to risky borrowers in the U.S. has ricocheted around the globe as banks including France's BNP Paribas SA and Germany's IKB Deutsche Industriebank AG disclosed troubles stemming from the defaults. The result has been an increased reluctance by banks to lend, pushing up the cost of credit and roiling world financial markets.

`Timely Examination'

In today's Financial Times, U.S. Treasury Undersecretaries David McCormick and Robert Steel wrote that a ``timely examination'' is required of financial institutions' liquidity and the role of credit-rating agencies. They also called for study of how derivatives are valued and whether there is enough oversight of off-balance sheet trading.

The report will be presented to the G-7 officials when their finance ministers and central bankers convene in Washington next month. Its ``recommendations will be an important input towards targeted, balanced and multilateral action,'' McCormick and Steel wrote.

Darling said a key for governments was to ``make the system more open and transparent.'' That's also the goal of French Finance Minister Christine Lagarde and her German counterpart, Peer Steinbrueck, who will work in Oporto to flesh out European proposals.

German Chancellor Angela Merkel and French President Nicolas Sarkozy this week called on the European Union to agree to measures by March 2008 to promote greater transparency in markets.

EU Solutions

``The European Union has to make up its mind how it wants to attend to its interests in the interplay of international financial markets,'' Merkel said Sept. 10. Standing beside her in Meseberg, Germany, Sarkozy said he won't accept speculative ``predators'' making profits at the expense of ``hundreds of thousands of jobs.''

Both the U.S. and U.K. officials said they were wary of increasing regulations on financial institutions, distancing themselves from French and German calls for hedge funds to be better monitored. How the G-7 acts is a likely topic when U.S. Treasury Secretary Henry Paulson meets Lagarde and Darling during a trip to Paris and London next week.

Steinbruck said Sept. 4 that the credit market rout has ``vindicated'' his efforts to get hedge funds, lightly regulated pools of capital, to adopt a ``voluntary code of conduct.''

`Central Issue'

Simon Johnson, chief economist at the International Monetary Fund, said yesterday that European governments should be wary of pointing fingers, as hedge funds have not been the source of the current turmoil and that some of the banks that have suffered have been on their watch.

``Hedge funds this time around are not the central issue,'' he said. ``Letting regulated banks go off and make money off- balance-sheet -- that's something we should look at now.''

The review may help to allay criticism of G-7 governments that they haven't done enough to temper the financial market turbulence, leaving it to central bankers to bolster confidence and inject emergency loans into the banking system.

``The banking sector illiquidites and hedge fund crisis sparked by the subprime mortgage meltdown are a global phenomenon,'' Carl Weinberg, chairman of Valhalla, New York- based High Frequency Economics Ltd., said in a note to clients yesterday. ``If ever the world needed a G-7 meeting of central bankers and financial ministers, it would have been sometime in the last few weeks.''

The Financial Stability Forum is a body of central bankers and regulators created in the wake of the Asian financial crisis of the mid-1990s. Earlier this year, it advised hedge funds to ``enhance sound practice'' after being tasked with studying the industry by the G-7.

To contact the reporter on this story: Simon Kennedy in Paris skennedy4@bloomberg.net

Last Updated: September 13, 2007 11:16 EDT