Spanish banks will require €59.3 billion in fresh capital to absorb losses resulting from the crash in the country's property market.
Out of the 14 banks surveyed in an independent review, or stress test, of Spain's financial institutions seven need fresh capital.
The remaining seven banks, including the country's largest lenders BBVA, Banco Santander and Caixabank, passed the tests.
The examination of the bank balance sheets was a pre-condition for a potential €100 billion rescue package for the stricken Spanish banking sector.
The package was agreed by euro zone partners in June, and is part of the government's continuing efforts to convince investors that it has got to grips with deep seated problems in the Spanish economy.
In a statement this evening the EU Commission said the announcement of the recapitalisation needs was a "key step" in restoring the stability of the banking sector in Spain.
In May the Spanish government ordered banks to recognise losses of €84 billion. Preliminary stress tests carried out in June established that the banks would need up to €62 billion in new capital to cope with those losses.
That examination and the more thoroguh stress tests published today were carried out by consultants Oliver Wyman. The firm has previously carried out work for Bank Of Ireland after being retained to establish the bank's likely bad debt levels in 2009.
