Europe must be ready in advance on stress tests-ECB's Asmussen

NEW YORK, Nov 21 (Reuters) - Next (Berlin: NXG.BE - news) year's planned European bank stress tests will lack credibility in financial markets unless authorities have a clear idea how to address any capital shortages uncovered, a top European Central Bank official said on Thursday.

"If you have no idea what to do, financial markets will not trust you," Joerg Asmussen, a member of the ECB's executive board, said during a post-speech question-and-answer session at the Council on Foreign Relations. "They will think you've simply fudged outcome in a way so you can deal with it."

Asmussen cited bank shareholders, national budgets and the European Stability Mechanism as the three layers of protection for troubled banks.

Banks are eager to raise capital before the Europe-wide stress tests next year, though many do not want to sell properties which are on their books at steep discounts.