Scramble to save banks as IMF warns of meltdown

WASHINGTON/CANBERRA (Reuters) - Rich nations rushed to shore up the global financial system after the International Monetary Fund warned of meltdown, with Australia and New Zealand guaranteeing bank deposits and newspapers reporting plans for Britain's biggest retail bank rescue.

The International Monetary Fund said it backed a Group of Seven plan to try to stabilize markets and urged "exceptional vigilance, coordination and readiness to take bold action" to contain a firestorm that pushed global stocks to five-year lows.

Under the Australian plan, all deposits in the country's banks, building societies and credit unions, would be guaranteed by the Australian government for the next three years, Australian Prime Minister Kevin Rudd told reporters.

The government would also guarantee term wholesale funding to local banks until global financial markets stabilized.

In the UK, the Sunday Times newspaper said Britain will launch its biggest retail bank rescue on Monday when the four largest, HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays, ask for a combined 35 billion pound ($60.5 billion) lifeline.

France promised that a meeting of European leaders in Paris on Sunday will detail measures to keep a market panic from triggering the most severe global downturn in decades.

French President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting in France, said they had "prepared a certain number of decisions" to present at the European summit to try to restore normal flows in blocked credit markets.

France's Economy Minister, Christine Lagarde, said just before leaving Washington that the Sunday gathering would go beyond talking about remedies to "put meat, muscles on the bones of that skeleton and to develop, follow up and execute upon it