Nearly one in five banks subjected to a crunch financial health check by the European Central Bank have failed the test, though no major banks were among them, according to official data on Sunday.
The Swedish Financial Supervisory Authority (Finansinspektionen – Fi) meanwhile conducted the test on Swedish banks Handelsbanken, Nordea, SEB and Swedbank who all made it.
"They still have decent margins," said Uldis Cerps at Fi.
Cerps warned however that the Swedish banks could however still be affected by how the ECB audit, which was aimed at preventing a recurrence of the single currency area's debilitating financial crisis, is received.
"If the stress test results in disruption in financial markets, then the Swedish banks will be affected," Cerps said.
The goal to avoid a repeat of the financial turbulence that followed the finance crunch in 2008, has become even more important in recent weeks, as the eurozone is seen to be again tottering on the edge of recession. There are rising fears of deflation and economic growth in key states France and Italy is stalling.
Even Germany, which had been doing well with exports, is looking at slowing growth on the back of weak investment.
"This unprecedented in-depth review of the largest banks' positions will boost public confidence in the banking sector," said ECB vice president Vitor Constancio.
He added that "this should facilitate more lending in Europe, which will help economic growth".
A total 25 of the 130 banks flunked the audit, the ECB said, adding that the worst results were concentrated in Italy, where some nine banks failed, as well as three in Greece and three in Cyprus.
The banks showed a combined capital shortfall of €25 billion (about $31 billion) as at the end of 2013.
Twelve of the 25 failing banks however have already covered their capital shortfalls this year, raising their capital by 15 billion euros, the ECB said.
Banks with shortfalls must prepare capital plans within two weeks and have up to nine months to cover the capital gaps.
As part of the audit, the ECB reviewed the quality of bank assets to make sure they were properly valued.
It also identified €136 billion in troubled assets, known as non-performing loans.