Morgan Stanley is responding to the credit crisis with a system that uses the market's view of its own creditworthiness as a basis for lending decisions, according to people familiar with the -matter.

These arrangements for determining the size of lending commitments to hedge fund clients were being put in place before the collapse of Bear Stearns. But implementation has gathered pace as investment banks seek ways to guard against the sudden loss of confidence - and resulting withdrawal of market funding - that crippled Bear.