The International Monetary Fund said in a Global Financial Stability Report that quick and coordinated government action is needed to prevent a much more intense and prolonged economic recession.

The report detailed that more capital is needed to cushion against further losses. An estimated $275 billion in capital for U.S. banks and $600 billion more for European banks would be needed.

The key challenge is to break the downward spiral between the financial system and the global economy, the report said.

IMF Managing Director Dominique Strauss-Kahn has sought to revamp the agency's lending programs to make them more flexible.

The 185-nation IMF, headquartered in Washington, is the globe's economic rescue squad, providing emergency loans to countries facing financial troubles.