The Group of Seven leading economies last night unveiled extensive plans designed to restore battered confidence in world financial markets shaken by the credit crisis on the both sides of the Atlantic.

G7 finance ministers and central bank governors agreed a brisk 100 day timetable for a rapid and far-reaching overhaul of crucial aspects of the global financial system aimed at quelling continued turmoil.

The ministers said that chief among the “immediate priorities” in five key areas for urgent action within the 100 days should be steps by leading banks and financial institutions to “fully and promptly” set out their losses and risk exposures to the hard-to-trade, illiquid mortgage-backed securities blamed for the seizure of credit markets.

In the G7’s communiqué last night it also called for an immediate overhaul of the international rules under which banks operate controversial off-balance sheet vehicles and value asset-backed securities. The ministers said that within the next 100 days, institutions should also strengthen their risk management practices and subject themselves, under supervision by regulators, to rigorous stress testing.

This latest development came as Alistair Darling, Chancellor of the Exchequer, refused to dismiss a bailout that would see G7 governments buy up mortgage-backed bonds to help banks to refinance themselves.

In a briefing before the key G7 meeting in Washington last night, Mr Darling said: “We are ready to look at any option to help reopen these markets. It would be quite wrong to rule out an option but options have to be realistic, affordable, practical and workable.”

He added that while he had not ruled out using taxpayers’ money to buy up toxic mortgage-backed bonds “we would have to look at the terms”.

Finance ministers from the G7 countries are meeting this weekend to discuss how they can cope with what Mr Darling described as “the biggest economic shock since the Great Depression”. Economists have speculated that the credit crisis that is engulfing the banking system can be addressed only by central banks and governments devising ways to help financial groups hive off certain types of mortgage-backed debt. Mr Darling said: “These are uncertain times. There are huge challenges ahead.”

The finance ministers have agreed to commit to recommendations presented to them in a report by the Financial Stability Forum (FSF) based in Basel, Switzerland. The report suggested that the world’s biggest economies force banks to increase the amount of capital they hoard. The FSF also proposed making banks disclose more details about their exposure to risky investments such as bonds backed by sub-prime mortgages and confess to how much they had sought to hive-off their balance sheets. The FSF wants national regulators to co-operate with their counterparts in other countries if one of the banks for which they are reponsible encounters difficulties.

It is expected that the ministers will sign up to an agreement that will insist all banks value their mortgage-backed debt in the same way. The agreement is also believed to include pledges to increase the level of transparency to shareholders and regulators about the quality of debt that banks buy. It is also expected to see G7 countries agree that regulatory bodies across the world will co-ordinate their supervision of financial institutions.

As the G7 ended its meeting it issued a communique which fired an apparent warning shot at foreign exchange markets over the speed and scale of the recent sell-off of the dollar, which has plunged this year, sending the euro to record highs. In comments that may trigger some resurgence in the US currency and selling of the euro, the G7 finance ministers said: “Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability.”

That change in wording marked an addition to the G7’s usual formulaic commitment to monitor currency markets and cooperate as appropriate.

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