Trichet - Risks to stability have risen considerably

European Central Bank President Jean-Claude Trichet appears at the Bretton Woods Committee International Council in Washington, September 23, 2011.

WASHINGTON (Reuters) - Risks to the stability of the financial system have risen considerably, European Central Bank President Jean-Claude Trichet said on Friday, as he urged authorities to take decisive action to stem the current troubles.

"Risks to the stability of the EU financial system have increased considerably," Trichet said in a speech to the Bretton Woods committee.

"Over the past few months, sovereign stress had moved from smaller economies to some of the larger EU countries."

"Signs of stress are evident in many European government bond markets, while the high volatility in equity market indicates that tensions have spread across capital markets around the world," he added.

The ECB has moved back into crisis mode in recent months as the euro zone sovereign debt crisis has intensified and threatened to suck in Italy and Spain.

Interbank lending market tensions have forced it to reintroduce previously retired bank support measures such 6-month loans and 3-month dollar funding, while investors are betting it will have to cut rates by 50 basis point next month and bring back 12-month liquidity.

(Reporting by Marc Jones)