European Central Bank policy maker and President of Germany's Bundesbank Axel Weber has said that banks must be allowed to fold.
He also backed the idea of issuing special bonds which would automatically convert to equity in the event of a crisis.
Speaking at the opening of Euro Finance Week in Frankfurt, Mr Weber stressed the need for stricter rules, and said a stable banking system was vital for long term growth.
High level officials held meetings over the weekend regarding the possibility of a rescue fund for Ireland.
It is understood the discussions involved officials from Ireland, Germany, the International Monetary Fund, the European Commission and the European Central Bank.
Last night, the Department of Finance repeated that it had not applied for external financial assistance.
Speaking on Morning Ireland, Labour Party's Finance Spokeswoman Joan Burton said the government's credibility was in question.
Meanwhile, the pressure on Irish bonds continues to ease a little this morning.
The interest rate demanded by investors to lend money to Ireland for ten years stands at 8.25%.
The Government will not be borrowing money from the bond markets until next year.
