"The crisis is systemic and must be tackled decisively," Trichet -- who is also president of the European Central Bank -- told the European Parliament's Committee on Economic and Monetary Affairs.

"The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond," Trichet said.

"National governments and authorities, as well as European institutions, must rise to the challenge and act together swiftly. Further delays are only contributing to aggravate the situation."

The ESRB was set up by the European Union to identify any emerging problems in Europe's financial system so that relevant authorities can act correspondingly.

Trichet said "clear decisions" were needed from governments on recapitalising the region's banks and a "clear response" on tackling the crisis.

The crisis in sovereign debt has reached global proportions and Europe was at its epicentre, he said.

There is a global sovereign risk crisis that has been observed in Europe, the United States and Japan, he said.

"We have to act collectively in order to cope with a systemic crisis of which we are at the epicentre."