By Mike Peacock
LONDON (Reuters) - Japan and France offered a helping hand to their banks on Tuesday and the International Monetary Fund (IMF) prepared to intervene in financial trouble spots in several corners of the globe.
Despite tentative signs investors were beginning to regain confidence, the IMF was poised to help Pakistan -- which said it needed up to $15 billion -- Iceland, Ukraine and others prevent systemic meltdowns.
Shares in France's top banks rose sharply after the French government said it would lend 10.5 billion euros ($14.12 billion) to boost their capital reserves.
Paris last week earmarked 360 billion euros as part of an international effort to help banks survive the worst financial crisis since the Great Depression almost 80 years ago.
In Japan, Economics Minister Kaoru Yosano said the country's big banks should also be entitled to injections of public funds if needed, as the government considered recasting a law that had been aimed mainly at recapitalizing regional banks to boost financing to credit-starved small firms.
"I can't see any reason why big banks should be discriminated against," Yosano told a news conference.
Japanese banks have avoided risky credit products but sharp share price falls in recent weeks have hit their balance sheets.
EASIER LENDING
Governments around the world have already promised about $3.3 trillion to guarantee bank deposits and bank-to-bank lending and in some cases have taken stakes in struggling banks.
That process is ongoing -- the Bank of England allocated $25.97 billion in an auction of unlimited one-month funds on Tuesday, while the Saudi central bank poured $2-$3 billion into its banking system, its first direct injection of dollars in a decade.
There are some signs it is paying dividends.
The interbank cost of borrowing dollars slipped again in London, with rates for overnight dollar deposits indicated in a range of between 0.3 and 1.4 percent, from around 0.5-1.5 percent early on Monday.
But the crisis will not conclusively be over until central bank and government support is removed and bank-to-bank lending -- frozen for much of the last year by uncertainty over which groups faced financial disaster -- is flowing freely again.
In the meantime, the world teeters on the edge of recession.
"Day by day, the evidence builds that we are facing a serious economic slowdown," European Commission President Jose Manuel Barroso told the European Parliament.
IMF TO ACT
Pakistan is expected to seek a multi-billion-dollar rescue package from the IMF and other bodies to avert a balance of payments crisis when officials meet in Dubai on Tuesday.
"Immediately, we don't need more than $10-$15 billion," Shaukat Tarin, the prime minister's economic affairs adviser, told Dawn News television channel.
The scale of support reflects international anxiety that Pakistan, considered vital to the "war on terror," is at risk of being destabilized and needs a massive cash infusion to stabilize its economy and pay for necessary imports.
Iceland, driven close to bankruptcy as frozen credit markets caused its banks to fail, is still deciding whether to take IMF money although the FT reported it was set to receive a $6 billion IMF-led rescue package soon.
Ukraine is in talks over an IMF loan of up to $14 billion and the Fund is ready to help in Hungary, Turkey and Serbia.
World leaders will hold a summit after the November 4 U.S. presidential election to set "principles of reform" needed to fix the financial system. The role of the IMF as global financial guardian is likely to be prominent on that agenda.
France also wants more regular meetings of the leaders of the 15-nation European single currency area.
"It's not possible for the euro zone to continue without clearly identified economic governance. We cannot continue in this way," French President Nicolas Sarkozy, who holds the European Union presidency, told the European Parliament.
STOCKS UP, POLICYMAKERS UPBEAT
The FTSEurofirst 300 index of top European shares rose 0.8 percent, extending their winning streak to a third day, as investors cheered the French move to bolster its banks.
Shares on Wall Street had gained after Federal Reserve Chairman Ben Bernanke backed more government spending to help the economy, and Japanese stocks rose on Tuesday.
On the whole, policymakers sounded more upbeat.
European Central Bank Executive Board member Juergen Stark said more "accidents" might occur in the global financial system but government actions had left Europe better placed to cope.
The head of Australia's central bank said an sharp interest rate cut this month and fiscal stimulus should buoy the economy.
"The likelihood of a global catastrophe has in fact declined over the past couple of weeks," said Glenn Stevens, Australia's central bank governor.
(Reporting from Reuters bureaus around the world; editing by Keith Weir)
