IIF looks for more central bank crisis coordination

CHICAGO, Sept 26 (Reuters) - Major central banks need to further step up their efforts to keep financial markets from seizing up, the head of an international banking lobby group said on Friday.

Charles Dallara, managing director of the Institute of International Finance (IIF), also said it was critical that the United States moves on the proposed $700 billion banking sector bailout plan "in the next day or two."

"Failing that -- we all better go home," Dallara told reporters on the sidelines of a Chicago Federal Reserve-European Central Bank conference.

Dallara said that once a U.S. plan was in in place, "it is of equal importance for comparable action in Europe" given the global scale of the banking crisis.

Dallara said the U.S. plan "may ease" funding pressures, but still stressed the need for central banks to provide liquidity out to 90-days duration.

"The interbank funding markets are simply not functioning," he said.

The IIF is based in the United States and represents more than 380 of the world's largest financial institutions.

Dallara said the long-running banking crisis would create "a whole new set of opportunities to reform the regulatory industry, globally and in a rational way." (Reporting by Ros Krasny; editing by Carol Bishopric)