THE Prime Minister has called on the City to disclose more about the risky and complex financial instruments that lie behind the current credit crunch that has seen lending liquidity dry up as banks shun taking on more debt.
Gordon Brown said that he would support international calls for greater transparency.
His comments come as a second British bank revealed its exposure to the US sub-prime crisis. Alliance & Leicester said it has tens of millions of pounds investe
d in risky asset-backed securities.
Germany's finance minister also said that the turmoil in inter-bank lending should force Britain to toughen its approach to hedge funds, which take on huge amounts of debt.
Mr Brown said: "The issue about transparency in relation to some of the financial instruments has been raised and is going to be discussed widely in the international community. We would support greater transparency."
There is also pressure on the Bank of England to make a public statement on the surge in the bank-to-bank lending rates, which are currently at their highest level for almost ten years.
Alliance & Leicester, the UK's sixth biggest mortgage lender, revealed it had £175 million invested in collateralised debt obligations (CDOs), parcels of assorted debt which includes US sub-prime mortgages.
However, it is believed the maximum potential loss it encounters could be £85m-£90m.
But A&L said it has not been "materially impacted" by the rise in inter-bank lending rates.
