The head of the group of 17 euro zone finance ministers has warned that the results of stress tests on euro zone banks scheduled for next year could be “worrying” as he underlined the need to have common bank resolution rules in place to govern the wind-down of banks if needed.

Addressing a conference in Brussels yesterday, Jeroen Dijsselbloem said banks would undergo asset quality reviews before they come under the supervision of the European Central Bank next year.

"The outcome. . .we don't know yet, but it might be worrying," Mr Dijsselbloem said, stressing the need to have the instruments in place "to deal with the problems". The European Central Bank is scheduled to take supervisory control of the region's banks from the middle of next year. While the ECB will supervise the bloc's larger and more troubled banks, it will have the power to intervene in smaller banks if needed, although they will remain under the supervision of national authorities.

Capital
Separately, it emerged last week that Irish stress tests on the country's banks will take place towards the end of this year, ahead of the EU-wide stress tests next year.

Despite having being recapitalised by billions of euro by the State, Central Bank governor Patrick Honohan said last month that Irish banks would need more capital before 2019. "The first thing that the ECB will have to do is to have an asset-quality review of the main banks that will be under their supervision, and soon after that all the other banks in Europe as well," Mr Dijsselbloem said yesterday.

The last EU-wide stress tests were undertaken by the European Banking Authority in 2010, but were criticised for giving a clean bill of health to banks that later ran into difficulty.

Concern that asset reviews could reveal further bank weakness is likely to inform next week's discussion in Brussels about the bank resolution regime. Finance ministers are due to discuss the issue of bank resolution, particularly the question of how creditors, including depositors, are "bailed-in" in the event of future bank collapses, at Tuesday's meeting of finance ministers, which will be chaired by Michael Noonan.

Mr Dijsselbloem stressed yesterday that deposits under €100,000 would remain protected under the new rules, but uninsured deposits above that threshold would be included in any bail-in under a proposal formulated by the Irish presidency of the EU Council ahead of next week’s meeting.