Central Bankers Say Crisis Not Over, Urge Regulation (Gonzalo Vina, Alison Fitzgerald)

April 12 (Bloomberg) -- Federal Reserve and European Central Bank officials said the eight-month credit squeeze is still festering and urged financial firms to speed disclosure of losses and improve the way they value assets.

``The market is still adjusting, the turmoil has not yet settled down,'' Fed Vice Chairman Donald Kohn told reporters in Washington today. ``It's still a fragile situation out there.''

Capital markets have seized up in the aftermath of $245 billion in asset writedowns and credit losses tied to the collapse of the U.S. subprime mortgage market. Finance ministers and central bankers from the Group of Seven nations yesterday endorsed a series of proposals from the Financial Stability Forum including a 100-day action plan to strengthen market regulation.

``This is one of the few instances where people who have both the power, but also more critically the jurisdictional responsibility in each country, gathered and agreed to take action,'' Bank of Italy Governor Mario Draghi, who chairs the Basel, Switzerland-based forum, told reporters.

The forum's proposals are the most sweeping call for tougher oversight of financial markets since the cost of credit jumped last August. The cost of borrowing in euros and dollars for three months was still at the highest since December in the past week.

`Better Balance'

``What we have to do is find a better balance between market discipline and regulation,'' New York Fed President Tim Geithner said. ``I don't think anybody can look at the system and say we got that balance right.''

Read More: Bloomberg