Speaking in London, the Federal Reserve chairman said he would like the Obama administration to combine further capital injections with a plan to remove troubled assets from bank balance sheets – the idea behind the ill-fated original version of Hank Paulson's troubled asset relief program (Tarp). “More capital injections and guarantees may become necessary to ensure stability and the normalisation of credit markets,” he said.

US Treasury bond prices fell slightly in the wake of Mr Bernanke's comments as investors acted in the hope that further government action would improve credit conditions.

Banks and other investors are sitting on many thousand of billions of dollars worth of illiquid assets for which there is little demand and only fire-sale prices. There were some $2,794bn worth of US asset-backed bonds alone at the end of last September, including subprime, credit card and commercial mortgage backed deals, plus more than €1,500bn of similar assets in Europe, according to the Securities Industry and Financial Markets Association.