Seven out of 91 European banks have failed so-called "stress tests" designed to assess their ability to survive a future financial crisis, the committee of European Banking Supervisors (CEBS) has said.
The results, released on Friday, were designed to measure how European banks would withstand another economic downturn, in an attempt to reassure gittery financial markets.
Al Jazeera's economics analyst Samah El-Shahat said that "it is good news that some banks have failed, as it will reassure the market of the test's vigour".
Shares in European banks ended up on the week, before the results were announced, and the cost of insuring the debt of most European banks fell after the announcement.
Some analysts believe that the tests were not thorough enough.
Chris Rupkey, chief economist at the Bank of Tokyo/Mitsubishi in New York said that "there might be some initial disappointment leading to some selling on Monday when European markets reopen, but the market will soon get over it".
Five Spanish banks, out of the 19 that were analysed, were among those that failed the tests.
Results 'not surprising'
"It is not surprising that Spanish banks have failed" because of problems in the country's mortage market, El-Shahat said.
The Spanish banks which failed were regional lenders hit particularly hard by problems in the housing market.
Hypo Real Estate, a German property and municipal funding specialist, and ATEBank of Greece, were the others to fail.
The banks were tested against a three per cent drop in GDP.
"As a result of the adverse scenario after a sovereign shock, seven banks would see their Tier 1 capital ratios fall below six per cent," the Committee of European Bank Supervisors (CEBS) said.
If the economy were to fall back into recession, the overall capital shortfall of the banks who failed would be more than $4bn.
All four major banks in France, BNP paribas, Societe Generale, Credit Agricole and BPCE passed the financial stability test for lenders "with success", Christian Noyer, governor of the Bank of France, the country's central bank, said.
Also in Portugal, despite the countries much publicised financial troubles, all four banks included in the tests passed, according to the Bank of Portugal.
The two Irish banks that were tested both passed.
The 91 banks that were tested account for about 65 per cent of the European Union's banking sector.
The European Union's president said the test showed the "high degree of resilience" of the European banking sector.
"I see nothing stressful about this test. It's like sending the banks away for a weekend of R&R"
Stephen Pope, equity strategist
Some analysts had expected about 10 banks to fail.
But this test does not prove that European banks are stable, our correspondent said.
The EU "doesn't know what would happen during a sovereign debt default from a government," El-Shahat said.
"Europe's banks are exposed to $2.6 trillion in soverign debt. What we need to see are the balance sheets."
The US bank stress tests, conducted last year, were more thorough, some analysts say.
"I see nothing stressful about this test. It's like sendign the banks away for a weekend of R&R," Stephen Pope, chief equity strategist at the firm Cantor Fitzgerald, said.