The European Banking Authority (EBA) carried stress tests on 90 banks in order to ensure that they could withstand another financial crisis.
And the EBA said that out of those 90 European banks eight failed the tests – five in Spain, two in Austria and one in Greece – and 16 others were in the danger zone because they only just passed the tests.
To guarantee that capital shortfalls would be quickly resolved the EBA called on national financial regulators.
All the banks will face pressure to strengthen their finances.
At the same time a 70bn euro austerity package was approved by Italy’s parliament. The country’s central bank announced that all Italian banks had passed the tests with “an ample margin”.
The aim of the tests is to identify weak banks and then ensure that they are made strong enough to survive a potential default on government bonds heavily indebted countries, like Greece.
Although the ratings agency Standard&Poors and others worried about the tests not being strict enough, the EBA said they were more stringent than those it carried out last year.
In 2010, months after being given a clean bill of health Allied Irish Bank needed a government bail-out.