FACTBOX: Possible global measures to ease financial stress

LONDON (Reuters) - Central banks mobilized worldwide on Monday to reassure plummeting financial markets frightened by the bankruptcy filing of Lehman Brothers and sale of Merrill Lynch -- Wall Street giants which many people once considered too big to fail.

But the latest series of measures announced by the likes of the U.S. Federal Reserve, the European Central Bank and the Bank of England were seen as national or regional firefighting rather than any agreed initiative by the world's monetary authorities to tackle the deepening global banking crisis.

On Sunday, the Fed announced that central banks, regulators and supervisors were in close contact internationally and monitoring events as they unfolded.

As calls grow for a more coordinated approach to shore up confidence in banks and financial markets around the globe, following is a list of measures that could possibly be taken by authorities from either the Group of Seven most industrialized countries or central banks under the auspices of the Bank for International Settlements.

1) Emergency meeting of international policymakers at either G7 or G10 central banking levels and joint statement of intent to act together to support the global financial system.

The next G7 finance ministers meeting is not until mid-October in Washington and policymakers may want to present a show of unity before then.

"The time has passed for piecemeal/reactive actions as seen in the past 12 months. Authorities need to throw all they have got at this because the consequences of not doing it are too frightening to entertain," said a Citigroup note to FX clients Monday.

2) Coordinated interest rate cuts from the world's major central banks to ease both the hiatus on lending markets as well as the pervasive economic fallout from the crunch.

A Fed rate cut at its policymaking meeting Tuesday is now widely discounted. The ECB is expected to cut rates only by end of March and the Bank of England by November. But the People's Bank of China surprised with a 27 basis point interest rate cut earlier on Monday.

"If financial markets become disorderly, with severe price action and a seizing up of market liquidity, central banks may want to counter the implied tightening of financial conditions and cut rates in order to stabilize confidence and prevent a negative feedback loop between falling asset prices and the real economy," Morgan Stanley economists said in note to clients on Monday.

3) Synchronized additions of short-term lending to stressed banks to ensure sound banks everywhere have adequate access to funding while trust is rebuilt.

The central banks have been doing this on an ad hoc basis since the credit crisis locked up interbank lending in August of last year.

On Monday, the Fed broadened the eligible collateral for its Primary Dealers Credit Facility and Term Securities Lending Facility to include the likes of equity, sub-investment grade debt and asset-backed commercial paper and added $50 billion in temporary reserves to the banking system. The ECB announced a temporary injection of some 50 billion euros of one-day funds to its banking system, although only a third of the amount that banks asked for. The Bank of England put an extra 5 billion pounds into the financial system after receiving bids of nearly five times the amount of three-day funds available.

"While the situation in financial markets remains fluid and the odds of a coordinated policy response have risen, we believe that central banks have chosen liquidity provision as their weapon of choice. The odds remain against an immediate coordinated interest rate policy response," Royal Bank of Scotland economists said in a note to clients Monday.

4) Specific additions of dollar liquidity to ease intense demand for dollars outside the United States and a boost to cross-border currency swap agreements between central banks.

These so-called Term Auction Facilities from the Fed and swap lines with other central banks have been a regular feature of central bank coordination since last December. Last month, in addition to the existing 28-day Term Auction Facility loans, the Fed offered an 84-day TAF credit to depository institutions which the central bank regulates and the ECB and Swiss National Bank said they would do the same. The Fed authorized an increase in its dollar swap line to the ECB to $55 billion from $50 billion and left its SNB swap line at $12 billion.

5) International support for banks under pressure via centralized funds or formal agreements on how to deal with the workout of any insolvency among global banking firms.

This is an area where there has been most disagreement -- how much taxpayers money should be put at risk to support financial firms. Lehman's bankruptcy filing was triggered in part by the U.S. Treasury's unwillingness to put more public funds at risk. The Bear Stearns demise in March saw the Fed open up direct lending to the broker banks while facilitating JPMorgan's purchase of the ailing investment firm. The UK's support of Northern Rock last September ultimately led to the bank's nationalization in February. The German government, domestic banking industry and KfW spent up to 10 billion euros trying to rescue troubled business lender IKB before selling it to U.S. investor Lone Star last month.