The world’s big investment banks accepted collective blame yesterday for lax lending and weak practices that triggered the present global credit market turmoil and vowed to shoulder responsibility for taking corrective action.

The admission by leading institutions of inadequate management of financial risks came as investors braced themselves for the reopening of equity markets on both sides of the Atlantic after Friday’s brutal sell-off on Wall Street. The plunge in American shares came on the twentieth anniversary of the Black Monday crash and wiped 366 points off the Dow Jones industrial average, marking Wall Street’s worst week for three months and reigniting fears over fall-out from the global credit squeeze.

As the world’s big banks accepted blame for market upheavals, they insisted that the global financial system was still “fundamentally strong”.

The acceptance by leading banks of their role in credit markets’ turmoil came from the Institute of International Finance (IIF), which represents 370 banking groups, including the biggest investment banks. Josef Ackermann, chairman of the IIF and of Deutsche Bank, said that the IIF had given early warnings that lenders should “not allow deal pressures to water down standards . . . Although there were some efforts to resist these tendencies, they were not sufficient to forestall the stress that has arisen.

“There have been mistakes. The weaknesses in business practices and market dynamics that have been revealed have highlighted the areas where industry practices need to improve. To be frank, this most recent experience calls on all of us to hone our practices.” The IIF said that a group was to study ways to tighten standards on liquidity, risk, transparency and off-balance-sheet vehicles. Mr Ackermann insisted, however, that the financial system was “stronger than ever” and that, despite Friday’s sell-off, “the equity market will continue to be relatively strong”.

The banks’ move to avoid a regulatory backlash came after weekend talks among ministers from the G7 leading economies deferred action to toughen supervision. The G7 set up a team to report by April on what action to take.

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