The 25 euro zone lenders that failed the European Central Bank's landmark health check of the banking sector had a capital shortfall of €25 billion at the end of last year, the ECB said.
12 of the 25 banks that failed the exercise, which was based on the banks' financial positions at the end of 2013, have since covered their capital shortfalls by increasing their capital by €15 billion in 2014
Italy's financial sector faces the biggest challenge with nine of its banks failing the test, according to watchdog the European Banking Authority, which coordinated the fourth EU stress test with the ECB.
Monte dei Paschi had the biggest capital hole to fill at €2.1 billion, even after its money raising efforts so far this year.
The EBA said three Greek banks, three Cypriots, two from both Belgium and Slovenia, and one each from France, Germany, Austria, Ireland and Portugal had also fallen short as of the end of last year.
The ECB has spent the last year reviewing the leading banks' assets and subjecting them to rigorous stress tests - an exercise aimed at flushing out any problems before it begins supervising the sector from November 4.
The ECB's pass mark was for banks to have high-quality capital of at least 8% of their risk-weighted assets in the most likely economic situation for the next three years, and capital of at least 5.5% under a bleaker scenario.
Banks with a capital shortfall will have to say within two weeks how they intend to close the gap. They will then be given up to nine months to do so.
The EBA required 123 lenders from across the EU to submit themselves to theoretical shocks such as a three-year recession and said 24 flunked in total.
The ECB's test included a higher number in the euro zone as it also included subsidiaries of big banks.
The ECB has staked its reputation on delivering an independent assessment of euro zone banks in an attempt to draw a line under years of financial and economic strife in the bloc.
But there is no certainty that bank lending will now pick up as the ECB hopes, to breathe life into a moribund euro zone economy.
Digging down into bank's balance sheets, the ECB said as of the end of last year, banks' book values needed to be adjusted by €48 billion and that non-performing loans had increased by €136 billion to €879 billion.
The ECB will not immediately force those lenders with overvalued assets to take remedial action but they will have to hold more capital eventually, leaving less room to expand, lend or pay dividends.
For lending, the more fundamental question is whether the demand for credit is there. The ECB is about to take on its new regulatory responsibilities but it may be its monetary policy powers that the euro zone needs most.
The ECB has spent the last year reviewing the assets of the euro zone's 130 biggest lenders and subjecting them to rigorous stress tests - an exercise aimed at flushing out any problems in the sector before it begins supervising the lenders from November 4.
The central bank also wants the review to draw a line under persistent doubts about the health of the euro zone's banking sector, with a view to boosting investor confidence in the region and helping support its flagging economy.
"This unprecedented in-depth review of the largest banks' positions will boost public confidence in the banking sector," ECB Vice President Vitor Constancio said in a statement.
"This should facilitate more lending in Europe, which will help economic growth," he added.
The fourth EU stress test of banks is being coordinated by the bloc's banking watchdog, the European Banking Authority (EBA), which required 123 banking groups from across the EU states to submit themselves to theoretical shocks such as severe recession.
The ECB has also scrutinised the balance sheets of 130 banks in the euro zone, a higher number as it also includes subsidiaries of big banks while the EBA test looks at group holding companies.
The ECB exercise has been billed as more transparent and rigorous than previous efforts, and included a forensic assessment of whether banks had properly valued their assets and a stress test - with 'baseline' and 'adverse' scenarios - to see if they had enough capital to withstand another crash.
The ECB said its adverse stress test scenario showed banks' capital would be depleted by €263 billion, reducing their median core capital ratio to 8.3% from 12.4% - more than in similar tests in the US.
Banks in Italy, France, Germany, and Spain would take the biggest hits under such adverse conditions.
The ECB has said lenders will have six months to cover capital shortfalls reported in its asset quality review or the baseline stress test scenario, and nine months to cover any capital shortfalls from the adverse stress test scenario.
Over the past year, more than 6,000 experts combed through the euro zone's 130 largest banks' books - including household names like Bank of Ireland, AIB, Deutsche Bank, Santander and BNP - to unearth any hidden losses and weaknesses.
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