The US authorities have no option but to prevent the disorderly failure of a large financial institution in current market conditions, Ben Bernanke said on Friday as he called on legislators to make dealing with the problem a top priority of regulatory reform.

Speaking for the first time since the Federal Reserve shocked markets by announcing plans to buy Treasury securities and more than double its purchases of mortgage-related securities on Wednesday, Mr Bernanke said the Fed was “generally encouraged” by the market response to its actions. He highlighted the decline in mortgage interest rates due to falling yields in financial markets.