Twenty-four European banks have failed “stress tests” of their finances, the European Banking Authority (EBA) has announced.
The banks now have nine months to shore up their finances or risk being shut down. No UK banks are included.
The review was based on the banks’ financial health at the end of 2013.
Ten of them have taken measures to bolster their balance sheets in the meantime. All the remaining 14 banks are in the eurozone.
The health check was carried out on 123 EU banks by the EBA to determine whether they could withstand another financial crisis.
The list of 14 includes four Italian banks, two Greek banks, two Belgian banks and two Slovenian banks.
The worst affected was Italian bank Monte dei Paschi, which had a capital shortfall of €2.1bn (£1.65bn, $2.6bn).
Analysis: Kamal Ahmed, Business editor, BBC News
With the European Union economies back in the headlines for not altogether comfortable reasons, today’s testing of the European banking sector provides a useful litmus test of how healthy the plumbing of those economies is.
Banks provide economies with funds to support growth. And it is worth saying that the more funds they keep on their balance sheet, the less they may be willing to provide to businesses.
Today’s “stress tests” suggest that banks are in better financial shape than they were in 2011, the last time they were undertaken.
Many analysts are sceptical about how these stress tests work. It has been regularly pointed out that previous tests managed to miss the subsequent collapses in the Irish banking sector and of Dexia, the Belgian bank.
The scenarios now, though, are different. The profits that banks are allowed to make through a future financial crisis are capped. Net income is slashed by 20% and there is greater transparency around how the data is used, giving more certainty to investors.
Another major change has been the Asset Quality Review, looking at banks’ loans and exposure to the debt of national governments. At least with these tests, we can have more confidence than in the past that they paint a reasonably comprehensive picture.
BBC World Service economic correspondent Andrew Walker says concerns about banks were a central element in the eurozone financial crisis and in some countries, their weakness remains a factor holding back economic growth.
Four UK banks were subjected to the EBA test: Royal Bank of Scotland, HSBC, Lloyds Banking Group and Barclays.
None of them failed the test, but Lloyds passed narrowly, with capital under adverse scenarios of 6.2%, not far from the 5.5% benchmark.
“We welcome the EBA’s confirmation that Lloyds Banking Group meets all the capital benchmarks set out for the purpose of the stress test, and that the group is not required to take any action as a result of the test,” a Lloyds spokesperson said.
“This strong position reflects the steps taken by the group’s management over the last three years to return its balance sheet to a robust position, and we will continue to use this strong basis to help Britain prosper.”
Still troubled: The 14 banks that still need to raise capital
Austria: Oesterreichische Volksbanken
Belgium: AXA Bank Europe, Dexia
Cyprus: Hellenic Bank Public Company
Greece: Eurobank Ergasias, National Bank of Greece
Republic of Ireland: Permanent TSB
Italy: Banca Carige, Monte dei Paschi, Banca Popolare di Milano, Banca Popolare di Vicenza
Portugal: Banco Comercial Portugues
Slovenia: Nova Kreditna Banka Maribor, Nova Ljubljanska Banka
At the same time, the European Central Bank (ECB) carried out an overlapping survey of 130 eurozone banks.
The ECB said 25 banks had failed its test, but 12 of those had already taken remedial action.
The ECB’s total is higher than the EBA’s because of Spain’s Liberbank, which passed the stress test but failed the ECB’s Asset Quality Review.
The European Commission welcomed the results of the EBA and ECB assessments.
It said they had been “robust exercises, unprecedented in scale and among the most stringent worldwide”.
It added that they represented an important step towards an operational Single Supervisory Mechanism, which is a key component of the EU’s planned banking union.
“Yet there is no room for complacency,” the Commission said in a statement.
“Rigorous and timely follow-up actions to the results of the exercises will be absolutely crucial,” it added.
Analysts said the results of the tests were much as expected. “The first impression is that there are few surprises,” said Max Anderl of UBS Global Asset Management.
“The document refers to many of the ‘usual suspects’, mainly in Greece, Portugal and Italy,” he added.