A major European financial institution is on the brink of collapse as EU leaders stopped short of offering a US-style rescue plan to banks.
Germany's second-largest mortgage lender, Hypo Real Estate, said a banking consortium withdrew from rescue talks.
Correspondents say its failure will put further strain on financial institutions in other countries.
Hypo, which has large amounts of bad debt, has suffered from the credit squeeze in international markets.
The bank said a consortium of German financial institutions involved in a government-led rescue plan pulled out of the negotiations after refusing to come up with nearly 36 billion euros for a bail-out.
Some analysts are saying the bank will not last more than a few days without a rescue package.
European leaders say 'non' to financial bailout
The leaders of Europe's biggest economies have agreed to work together to support financial institutions, but without forming a joint bailout fund.
French President Nicolas Sarkozy hosted a meeting of the leaders of Britain, Germany and Italy in Paris.
The meeting issued a statement of principle rather than proposing new concrete measures to deal with the worst financial crisis since the 1930s.
A joint statement issued from the meeting in Paris said: "We jointly commit to ensure the soundness and stability of our banking and financial system and will take all the necessary measures to achieve this objective."
Mr Sarkozy said the four countries would intervene to help commercial institutions in trouble, but there would be no bail-out fund and authorities would penalise executives and shareholders under the terms of rescue packages.
"Each government will operate with its own methods and means, but in a coordinated manner," said Mr Sarkozy.
He said bonus structures for top executives should be "revisited in order to avoid incentivising the taking of excessive risk and to fight against what we can call 'short-termism'".
And they agreed to show flexibility when applying strict European state aid rules - as has been the case in Britain, where Brown's government waived through a proposed merger deal between Lloyds-TSB and HBOS.
British Prime minister Gordon Brown said no sound and solvent bank would be allowed to fail for lack of liquidity and he repeated the point at the news conference.
"We will continue to do whatever is necessary," he said.
Mr Sarkozy called for a "task force uniting regulators, central banks and ministers" to take charge of monitoring the coordinated response.
German chancellor Angela Merkel spelled out that European states must "take their responsibilities at a national level" for the banking crisis, while being careful not to harm other European states.
The meeting follows approval by the US Congress of a $US700 billion bailout plan for the US economy, the starting point of the trouble that is rocking stock markets and paralysing funding markets to a point that is destabilising banks on both sides of the Atlantic.
