The Securities and Exchange Commission (SEC) is forcing American banks to secure more capital for longer periods to protect themselves from even more drastic events than the collapse of a US investment house.

In a testimony to the Senate in Washington, Erik Sirri, director of trading and markets at the SEC, said that the regulator was "closely scrutinizing the secured funding activities of each...firm with a view to lengthening the average term of secured and unsecured funding arrangements."

He added that: "We are in the process of establishing additional scenarios, focused on shorter duration but more extreme events that entail a substantial loss of secured funding."

The SEC, the Federal Reserve and the US Treasury are all seeking to force America's banks to increase the amount of liquid assets, such as cash, that they hold on their balance sheets and to face up to how much they rely on credit markets.

Regulators are scared of allowing a repeat of the near collapse of Bear Stearns earlier this year. While the bank held good quality assets such as Treasury bonds on its books, it had assumed that it would be able to use the debt as collateral to raise new funds.

Mr Sirri's comments came as John Thain, chief executive of Merrill Lynch, the US investment bank, insisted that the worst of the credit crisis is over, as part of a speech in Bombay.

However, Mr Thain warned that a rise in bad consumer debt is poised to present US lenders a fresh worry.

Mr Thain, who heads one of the banking sector's biggest casualties that has written off more than $30 billion and plans to axe 4,000 jobs, said that Wall Street's future write-downs will not be "anywhere near" the more than $300 billion already declared in the wake of the collapse of the US sub-prime mortgage market.

He was less sanguine, however, over the fate of US consumers, who he believes will struggle to pay off home loans and credit cards in the wake of an economic slowdown. "Those [lenders exposed to consumer credit] are likely to experience greater delinquencies going forward than we've seen before," he said.

"I believe the combination of falling home prices, rising food and energy prices and higher unemployment will result in a pull back on the [US] economy in the next six to 12 months."

Mr Thain suggested that the expected wave of bad debt will hit US regional lenders the hardest. Most of Merrill's planned 4,000 job cuts will be in the US, he added.

Mr Thain, who cited narrowing credit spreads and an uptick in debt financing in recent weeks, joined Hank Paulson, the US Treasury Secretary, in calling the probable end of the credit crisis.

Earlier this week, Mr Paulson said that "things feel better today, by a lot, than they did in March" but added that there were likely to be further "bumps along the road".

Mr Paulson's assessment was one of the brightest from a US official for several months and reflects a feeling in some quarters that the US Federal Reserve's decision to prevent the collapse of Bear Stearns and provide liquidity to other banks marked a turning point.

Mr Thain also endorsed that broad outline of Mr Paulson's plan to overhaul the system of regulation on Wall Street, which foresees a cut in the number of watchdogs to reduce overlaps and increase efficiency.

Merrill has been among the hardest hit by the subprime crisis. The group posted a $2 billion loss in its latest quarter, on top of an $8.6 billion loss last year.

Mr Thain confirmed yesterday that Merrill has no current intention to raise fresh capital. The bank has raised $15.5 billion since the start of the year.

"Our equity capital is $44 billion, which is just a little under its record high," he said.

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