Berlin - German Chancellor Angela Merkel called Tuesday for better arrangements to ensure that future crises in the financial sector can be averted.

A new system needed to be developed involving all major players in the sector, she said in an address to parliament on the banking crisis which has engulfed Europe.

Describing the global financial crisis as unprecedented, Merkel said it had confirmed many people's suspicions of greed and irresponsible speculation.

"The situation is serious," the chancellor said. "Confidence, the most important currency of the financial markets, has been lost. ... It is vitally important to restore confidence."

In order to achieve this, stricter international rules were needed for the financial sector, including short-term measures that would help stabilize the situation, she said.

In this context she defended this week's 50-billion-euro (68-billion-dollar) bail-out for troubled German mortgage lender Hypo Real Estate (HRE).

If her government had not acted when it did, she said, the situation could have become far more serious and spread to other financial sectors.

The bank, which mainly lends to commercial projects and builders of public facilities such as airports and roads, is the biggest German casualty of the credit crunch that has spread from New York in the last month.

HRE fell into crisis after its Dublin-based subsidiary Depfa ran out of cash. Its difficulties prompted Merkel to guarantee all savings deposits in Germany, a pledge she repeated to parliament.

Merkel also rejected proposals for a European-wide fund to help banks that run into liquidity difficulties, arguing that managing such a scheme would be time-consuming and unwieldy.

She criticized moves by the Irish government to guarantee funds deposited in Irish banks, saying this discriminated against foreign banks operating in the country and distorted competition.

The chancellor also called for executives to be called into account for their actions if their banks run into trouble.

In this context, she attacked the payment of large bonuses for short-term gains. Executive remuneration should be based on long-term performance, she said.

Merkel also called for new regulations to deal with rating agencies, whom she said played a major role in falsely estimating the value of bank assets, thus contributing to the current crisis. (dpa)