More banks and financial institutions may have to turn to the government to be bailed out of the ongoing credit crisis, the former chairman of the Federal Reserve, Alan Greenspan, has warned.

Coming as Northern Rock reports a loss of almost £600 million for the first half of 2008, Mr Greenspan explained that, even though the world's banks have diverted millions of pounds into liquidity, stability within the financial sector could be some way off and several more corporate casualties are likely.

"There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments," he concluded, writing in the Financial Times.

Indeed, he added that the current rise being seen in the number of insolvencies will only come to an end once the US housing market - which serves as the "ultimate collateral support" for the world's mortgage market - bottoms out.

However, on a more optimistic note, Mr Greenspan explained that non-financial corporations have fared "surprisingly well" amid the credit crunch, though he warned that a deep-rooted fear of insolvency among business leaders could stunt any future global economic growth.