WASHINGTON - THE United States on Thursday said it would seek stronger capital standards for banks as part of a global agreement by the end of next year to help prevent another financial crisis.

'A comprehensive agreement on new international capital and liquidity standards should be reached by December 31, 2010, and should be implemented in national jurisdictions by December 31, 2012,' the Treasury Department said in a statement on the eve of the two-day talks beginning Friday in London.

The plan calls for 'core principles' that should guide reform of the international regulatory capital and liquidity framework 'to better protect the safety and soundness of individual banking firms and the stability of the global financial system and economy.'

Mr Geithner said on Wednesday that the United States would outline a framework of principles to begin the discussion on a 'new international capital accord.'

'That will put in place - again, once the crisis is behind us - a more conservative framework of constraints on leverage in the financial sector across the major, globally active financial institutions,' he said.

The banking sector was a major casualty of the financial crisis stemming from a US housing mortgage meltdown that shook the United States, Europe and other countries and slammed the brakes on global growth.

In the United States, the crisis led to the collapse of the venerable investment bank Lehman Brothers and a massive government bailout of financial institutions.

'The global regulatory framework failed to prevent the build-up of risk in the financial system in the years leading up to the recent crisis,' the statement said.

Major financial institutions around the world had reserves and capital buffers that were too low, used excessive amounts of leverage to finance their operations, and relied too much on unstable, short-term funding sources, it said. -- AFP