The billionaire financier, George Soros, has called for a new institution to regulate international lending.

Writing in the Financial Times of London, Mr Soros says that the economic crisis in Asia threatens to engulf the world financial system and provoke global deflation.

He proposes that a new international credit insurance corporation, working alongside the International Monetary Fund, should guarantee international loans, on the basis that borrowing countries reveal all their debts.

Mr Soros said: "To argue that financial markets in general, and international markets in particular, need to be regulated is likely to outrage the financial community; yet the evidence for just that is overwhelming."

He said the timing is right for such an idea, since nobody would be interested when markets were buoyant.

"Such an institution can be set up only at a time when international lending is in a state of collapse," he said. "We are now entering such a period."

Mr Soros has been criticised by the Malaysian Prime Minister, Mahathir Mohamad, who has accused international speculators of contributing to the destabilisation of the Asian markets. He has strongly rejected such claims.

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