The US housing slump is likely to be extended and "continues to pose a considerable downside risk to the US economy", the US Treasury secretary warned in a speech in London on Wednesday.

"We should not be surprised at continued reports of falling home prices," Hank Paulson warned in a speech at Chatham House, the international affairs think-tank.

Among the measures necessary to prevent repetitions of the housing meltdown, he said, were stronger oversight of the way mortgages are extended to housebuyers and national licensing standards for mortgage brokers - measures which in the past had been vigorously resisted by the housing industry.

Separately, Mr Paulson underlined the need to overhaul the US's "balkanised" financial regulatory system, in which a multitude of bodies participate.

Among the most pressing matters to face US regulators - particularly since the near-bankruptcy of investment bank Bear Stearns in March - was the fact `Americans have come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk'.

The US needs a new "market stability regulator" with the authority to avert system-wide melt down in financial markets, he said. Such a regulator would allow banks to fail as a result of their own risky behaviour while protecting the rest of the system from contagion.