Paulson says banks make progress on capital

OSAKA, Japan (Reuters) - U.S. Treasury Secretary Henry Paulson said on Friday that major investment banks were making progress toward achieving greater stability, in the wake of the credit crunch.

"Since March, I believe the investment banks have continued to make progress," Paulson told a small group of reporters who traveled with him to Osaka, Japan, for a meeting of Group of Eight finance ministers.

"Some have learned lessons," he added. "They have continued to deleverage, they've improved their funding and liquidity and they've strengthened their capital position."

Paulson did not mention any specific banks but his comments came a day after Lehman Brothers announced a management shake-up that rattled markets again.

Lehman demoted its chief financial officer and chief operating officer days after the investment bank said it expected its first-ever loss as a public company and after a lengthy slide in its share prices this year.

Several major U.S. investment banks are scheduled to release financial results next week, with investors still wary nearly a year into the credit crunch, which has cost banks billions of dollars.

The G8 includes the United States, Japan, Britain, Canada, France, Germany, Italy and Russia. Finance ministers are expected to discuss the condition of the global economy and to set an agenda for a July meeting of political leaders from their countries, which also will be held in Japan.

U.S. officials said ahead of the gathering, which begins on Friday evening and concludes with a closing communique Saturday afternoon, that they thought it would focus on the impact of soaring energy prices on the global economy.

But it is unclear what, if anything the G8 can do about it.

The finance ministers are meeting without their central bankers, so foreign exchange values are not a formal agenda item but officials from the U.S. and other countries said it was inevitable that it would arise in the course of the economic discussions.

(Reporting by Glenn Somerville; Editing by Rodney Joyce)