One in five banks in the Eurozone would be unable to survive another major economic crisis, and some institutions could be shut down if their finances do not improve.
A detailed report by the European Central Bank has revealed that 25 banks are in poor financial health - and that 13 of those desperately need to strengthen their buffers against losses.
If the failing banks are unable to raise more cash in the next nine months, they could be forced to shut down.
The financial institutions affected are mainly based in Italy, Greece and Cyprus - and a stress test to ascertain the resilience of British banks is only due to take place in December.
It is hoped that the in-depth review, which covered 130 of the biggest European banks, will help to identify potential vulnerabilities in the banking system, give companies better access to credit, and strengthen the bloc's economy.
The ECB, which is based in Frankfurt, is set to become Europe's central banking supervisor on 4 November. It organised the test so it would become aware of any weaknesses before it gained regulatory powers.
One of the organisation's main tasks is to help small and medium-sized companies across Europe find it easier to get accepted for credit from their bank of choice, enabling them to expand and stay in business.
A lack of available credit has been blamed on the Eurozone's stagnation - with the group of 18 nations using the euro showing no growth whatsoever between April and June.
"This review of the largest banks' positions will boost public confidence in the banking sector," said Vitor Constancio, the vice president of the ECB. "It will help repair balance sheets and make the banks more resilient and robust."
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