Prime Minister Gordon Brown has argued that world institutions need to be reformed if they are to work better in the global economy.
Gordon Brown says protectionism must be avoided
Speaking at the World Economic Forum in Davos, Mr Brown said bodies like the World Bank were set up decades ago, and not designed for the problems of 2008.
He added that more transparency was needed to ensure market stability.
But he said "heavy-handed regulation" and protectionism were not the solution to recent market volatility.
"There is a recognition that we need global institutions where we have global capital," said Mr Brown.
In fact, he said, there was a need for more globalisation not less, to reflect the changes in the way the world financial markets operate.
While the economy has become largely global, many regulatory bodies remain national - and are therefore not suited to solving world financial matters.
Mr Brown said the recent problems in the credit market had stemmed largely from an underpricing of risk. The reason this had not been discovered earlier was due to a lack of transparency, he said.
A slowdown in the US economy, and specifically a jump in defaults in the sub-prime sector, has prompted many banks to tighten their lending policies.
This in turn has made it harder for banks and consumers to borrow.
With leading banks still revealing large write-offs as a result of losses in investments linked to the mortgage sector, Mr Brown highlighted that there was still much uncertainty about the depth of the problems.
To avoid a repeat of the recent credit crunch there needed to be an early warning mechanism to highlight problems, he argued.
He also said that, as financial markets are increasingly interlinked, there was a need for effective crisis management between nations.
Mr Brown reiterated his support of free trade adding: "The challenge is to show we can make the world trade talks move forward."