The heads of Wall Street's top banks on Thursday urged President Barack Obama and Congress to reach a deal on the debt ceiling, warning of "very grave" dangers if agreement is not reached.

"We strongly urge you to reach an agreement this week," the chief executives of Bank of America, Citigroup, Goldman Sachs,JPMorgan Chase, Morgan Stanley, Wells Fargo and other top financial firms wrote in a joint letter.

"The consequences of inaction -- for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America's global economic leadership -- would be very grave."

The bankers warned that a default by the US government or a downgrade of its top-notch credit rating would be "a tremendous blow", roiling stock markets, undermining the dollar and deeply damaging the fragile US economy.

"Given this very real risk, policymakers must correct our fiscal course now, inspire market confidence by paying all of our bills on time, and demonstrate that America is a democracy capable of putting differences aside to solve our most challenging problems."

The open letter was issued by the Financial Services Forum, a financial industry association. It was signed by the heads of 13 big banks, insurance companies and financial advisory firms, as well as the head of the forum.

Wall Street has looked on with growing alarm as Democrats and Republicans in Congress remain deadlocked on raising the US government's $14.29 trillion debt ceiling, five days before a looming deadline set by the US Treasury.

The Treasury says that if the debt ceiling is not raised by next Tuesday, the United States could be forced to default on its debts, which could have catastrophic effects on financial markets.

Ratings agencies have also warned that the United States' triple-A credit rating could be at risk even if a default is averted.

Despite the warnings, the two political parties are still deeply split over differences on tax increases and spending cuts and have been unable to reach agreement even after lengthy negotiations.