Banks from Ireland, Italy, Spain and Austria fared worst in the latest European Union stress test, which the region's banking watchdog said showed there was still work to do in order to boost credit to the bloc's economy.
AIB and Bank of Ireland - along with Italy's Monte dei Paschi, Austria's Raiffeisen and Spain's Banco Popular - came out with the worst results in the EBA's test of 51 European Union lenders.
In a statement, EBA Chairman Andrea Enria (below) said: "Whilst we recognise the extensive capital raising done so far, this is not a clean bill of health. There remains work to do."
Monte dei Paschi, Italy's third largest lender, had been scrambling to pull together a rescue plan and win approval for it from the European Central Bank ahead of the test results.
The Italian bank confirmed less than an hour before the results that it had finalised a plan to sell off its entire portfolio of non-performing loans and had assembled a consortium of banks to back a €5bn capital increase.
The EBA looked at how banks could withstand a three-year theoretical economic shock which ended with the Italian lender, the world's oldest, having a core equity capital ratio of -2.44%.
Analysts have informally set a basic pass mark of 5.5%, the threshold set in the last round of tests in 2014, and a weak result could raise question marks over dividend payments.
Like Monte dei Paschi, AIB was also below the 5.5% level at 4.31%, but said it has undergone fundamental restructuring and is now sustainably profitable.
AIB said that the stress test is based on 2015 figures and "does not reflect current or future improved performance", adding that the bank "is well capitalised".
Markets will also look at how many banks were able to maintain a core ratio of capital to risk-weighted assets of 7%. This is a typical level for triggering the writedown of bonds issued by banks to replenish capital.
Spain's Banco Popular, Bank of Ireland and Austria's Raiffeisen all ended the test below this level at 6.62%, 6.15% and 6.12%, respectively.
Bank of Ireland said its "capital position is strong". The bank also said it "continues to organically generate capital" and that it expects "to meet, at a minimum, applicable regulatory capital requirements plus a management buffer".
Germany's biggest banks, Deutsche Bank and Commerzbank, were also among the 12 weakest banks in the test, along with British rival Barclays.
Of the banks tested, 37 are based in the eurozone and supervised by the ECB, which said the results reflected progress in repairing balance sheets.
"The banking sector today is more resilient and can much better absorb economic shocks than two years ago," said Daniele Nouy, who heads supervision at the ECB.
At the start of the test, the banks had an aggregate core ratio of 12.6%, with all capital requirements factored in. However, this fell to 9.2% by the end of the test, a drop of 340 basis points, equivalent to €226bn of capital.
For the first time, the EU test included the impact of conduct risks such as fines and settlements.
EBA said the total hit from conduct costs was €71bn. The largest impact was from credit or losses on loans, totalling nearly €350bn across all the banks tested.
