The International Monetary Fund on Tuesday released a gloomy assessment of the global financial system, saying the credit crisis has worsened over the past six months and threatens economic growth.

Despite "unprecedented intervention" by central banks such as the Federal Reserve, "financial markets remain under considerable strain, now compounded" by a slowing economy, low levels of capital at financial companies and widespread efforts to unload debt, the fund said.

The U.S. mortgage and credit crises could cause almost $1 trillion US in financial losses, the IMF said in an update to its Global Financial Stability Report, with $565 billion US of those losses stemming from the residential mortgage market and related securities, and the rest from the commercial real estate, consumer credit and corporate debt markets.

Government regulation and supervision of the financial sector, along with private sector risk management, "all lagged behind the rapid innovation" of banks and securities firms, which resulted in "excessive risk-taking, weak underwriting … and asset price inflation," the IMF said.

Among other steps, the IMF recommended streamlining regulation of the financial sector to avoid subjecting banks and other financial firms to multiple supervisors.

U.S. Treasury Secretary Henry Paulson has proposed a regulatory overhaul along those lines that would eliminate some agencies and consolidate others.

Most of Paulson's blueprint would require congressional approval, however, and is unlikely to be enacted before President George W. Bush leaves office.

The IMF issued the update in advance of the spring meeting of its governing board, which takes place this weekend in Washington.

The IMF, which consists of 185 member nations, conducts economic analyses and provides loans and technical assistance to developing countries.