Federal Reserve Board Chairman Alan Greenspan and Treasury Secretary Robert E. Rubin told Congress Wednesday that global regulators must work together to establish better standards for lenders and borrowers in emerging markets.

Testifying before the House Banking Committee, Mr. Greenspan said such cooperation would include helping developing countries improve their bank oversight and establishing incentives for foreign banks to curb risky borrowing and foreign currency trading.

"There are certain conditions precedent to establishing a viable environment for international capital investment, one not subject to periodic systemic crises," Mr. Greenspan said. "Conditions that should be met before engaging in international borrowing need to be promulgated and better monitored by domestic regulatory authorities."

Mr. Rubin agreed and blamed the economic problems that began in Asia last year and have spread globally on "badly flawed financial systems" and ill-considered overseas investments. The international community must develop better "preventive measures" to quell the frequency and severity of economic emergencies, he said.

However, lawmakers sought more short-term solutions from the regulators, such as a preemptive reduction in U.S. interest rates to stimulate the economy.

Under questioning from committee Chairman Jim Leach, Mr. Greenspan said no coordinated effort is under way among the industrialized nations to reduce interest rates.

Both officials pressed lawmakers to provide $18 billion for the International Monetary Fund before they adjourn in early October. The Senate has approved funding twice this year, but House efforts have stalled over questions about the effectiveness of the international bailout organization.

"It is imperative that Congress act and act now," Mr. Rubin said. "Every day that Congress does not approve the request for IMF funding increases our vulnerability to a crisis and decreases confidence in global markets."

Mr. Greenspan concurred in the assertion of some concerned committee members that the IMF is due for a revamping because of the rapidly changing world economy, but he said reforms could wait.

Continuing to read off each other's scripts, Mr. Rubin and Mr. Greenspan urged governments trying to stem economic distress not to react by impeding the flow of international capital.

The Fed chairman warned governments in Asia, Eastern Europe, and Latin America that blocking investments from leaving their countries would create a "temporary sense of well-being" and overlook the real impediments to long-term recovery.

"The obvious consequence of confiscating part, or all, of foreign investors' capital and/or income is to ensure a sharp reduction in the availability of new foreign investment in the future," he said.

Further, Mr. Rubin cautioned financial firms to make judicious credit and investment decisions and not let panic force them out of solid markets.

"Just as capital flowed into emerging markets indiscriminately, and that was a mistake, capital is now flowing out indiscriminately, and this is also a mistake," he said.

Bankers had sounded identical notes earlier Wednesday.

The Institute of International Finance urged the financial community, world governments, and international institutions to cooperate on keeping markets open and managing international capital flows with a light hand.

The group cautioned lenders not to abandon countries that are pursuing sound economic policies. While some countries such as Russia and Malaysia have taken "highly counterproductive actions" recently, many emerging market economies in Latin America and Central Europe, as well as some places in Asia and Africa, are continuing reforms, group officials said.

"It is very important that you have this differentiation," William R. Rhodes, vice chairman of the group and of Citibank, told reporters via conference call. "I am heartened by the actions being taken by countries like Brazil, like Argentina, like Mexico."

Mr. Greenspan largely blamed the East Asian crisis on "lax" due diligence standards by lenders and borrowers in the face of the surge in U.S. stock prices during the 1990s and foreign government guarantees of investments. The kind of "reckless international borrowing" that occurred there is more of a systemic threat than losses by lenders, he said, and could be avoided with new international standards.

Besides tougher bank supervision in emerging markets, he called for greater disclosure and timely data, improvements in laws for settling defaults, and "carefully tailored" temporary financial assistance for troubled countries in the interim.

Mr. Rubin said he and Mr. Greenspan plan to meet soon with financial officials from 22 countries to discuss international financial policies.

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