US Federal Reserve vice-chairman Janet Yellen said that the Fed will be carrying out a fourth round of stress tests in the coming weeks to determine if US banks can withstand a recession.

During a speech at the Federal Reserve Bank of Chicago on Friday, Ms Yellen said that the tests are necessary because of the increased downside risks that Europe’s debt crisis poses to the US economy and financial markets.

“We are monitoring European developments very closely, and will continue to do all we can to mitigate the consequences of any adverse developments abroad on the US financial system,” she said.

The Fed oversees Wall Street’s biggest banks, including Citigroup, Bank of America, JPMorgan Chase & Co. and Wells Fargo and has performed periodic stress tests on the 19 banks it monitors since 2009.

It believes the tests are a key part of its ongoing efforts to make sure that banks – and the entire financial system – are stable. Those that do not pass the stress tests are asked to take steps to raise new capital in case of big losses.

Previous tests were carried out in 2009, late 2010 and early 2011.