The British government has given customers of besieged lender Northern Rock an unprecedented guarantee that their savings were safe, while Australia's central bank denied speculation on Tuesday that banks there had sought emergency funds.

European Central Bank policymaker Yves Mersch told a newspaper: "Northern Rock looks very bad," adding it would "take some time" before it became clear how badly banks around the world have been hurt by the global credit crisis that started in August.

Investors expect the US central bank to cut its benchmark interest rate later on Tuesday to ease tensions in markets where banks are reluctant to lend to each other for fear of exposure to high-risk US subprime mortgage debt that has been extensively repackaged.

The Reserve Bank of Australia, which has pumped billions of dollars into money markets as lending dried up, quickly denied speculation that one or more regional banks were seeking emergency funding.

"Those rumours are false," said Reserve Bank of Australia Deputy Governor Ric Battellino. The rumours drove the Australian dollar lower and hurt shares of several regional Australian banks.

The Bank of England injected emergency funds into money markets at its 5.75 percent benchmark rate on Tuesday saying it wanted to "offset the disturbance" in markets caused by the Northern Rock crisis.

It awarded less than a fifth of the 25 billion pounds banks had bid for, but succeeded in bringing the main overnight sterling interbank rate down to around 6.14 percent from highs of 6.5 percent on Monday.

Meanwhile the UK government's pledge late on Monday to guarantee all deposits held by Northern Rock -- Britain's fifth biggest mortgage lender -- seemed to have reassured savers.

Customers queued at branches for a fourth day early on Tuesday, but they were significantly shorter than on Friday, Saturday and Monday. Northern Rock shares, which had more than halved in value since Friday, rose 10 percent in early trading.

Northern Rock's innovative use of financial markets to raise funds had made it a favourite of stock investors, but the strategy backfired when credit dried up, despite its own very limited exposure to the high-risk US mortgage debt that triggered the crisis.

Most policymakers have held back from proposing regulation to avert future breakdowns in interbank lending. However, German Finance Minister Peer Steinbrueck said on Tuesday financial market transparency would be a major theme when the Group of Seven economic powers meet in Washington next month.

ECB policymaker Christian Noyer defended central banks' efforts to pump cash into money markets to try to hold down lending rates, saying this had nothing to do with bailing out careless investors.

"Excessive risks were taken and losses will have to be accepted. It is important that monetary and financial authorities take no action that would prevent this process from running its course, let alone be seen to be condoning past or future excesses," he said in a commentary published in the Financial Times on Tuesday.

Third-quarter earnings results this week from big US investment banks, starting with Lehman Brothers on Tuesday, will give more indications of how hard the credit crunch has bitten.

Morgan Stanley, Bear Stearns Cos. Inc. and Goldman Sachs Group Inc. also report this week.

The Northern Rock crisis has weighed on the shares of mortgage lenders in Spain and Ireland whose housing markets, like those in Britain and the United States, have fuelled long-running consumer spending booms.

Policymakers around the world are worried the crisis could sap economic growth by making it harder for companies and consumers to borrow money.

Japan's finance minister, Fukushiro Nukaga, sought to sooth investors on Tuesday, saying he did not see the U.S. mortgage problems inflicting serious damage on the world's second-lar