Eurozone countries must prepare to shut their failing “zombie” banks and quickly pool the money to do it, the bloc’s top regulator said yesterday, ahead of a warts-and-all investigation of its still-fragile financial system.

Daniele Nouy, head of the European Central Bank’s new supervisory board, said she has “no worries” about Europe’s banks operating in Ukraine.

The European Central Bank’s willingness to let lenders fail will depend on the funds available to wind them down, analysts said, after the new head of banking supervision said some should go out of business.

ECB vice president Vitor Constancio said the fact that eurozone bank balance sheets will be probed before undergoing a simulated economic downturn later this year makes the test harder to pass.