Seven of 91 European banks have failed crisis "stress tests," prompting regulators to declare the sector sound overall and winning a thumbs up from the IMF and Washington.
But many experts questioned the severity of the health checks, announced on Friday, despite statements from the International Monetary Fund and the United States that the exam would help boost confidence and market stability.
German state-owned lender Hypo Real Estate, Greece's ATEBank and five regional savings banks in Spain failed the key test of capital strength conducted by the Committee of European Banking Supervisors (CEBS).
For the seven at-risk banks, the body estimated the shortfall of capital at 3.5 billion euros.
Some analysts said the checks failed to shed much light on the sector.
Neil MacKinnon, an economist at VTB Capital in London, said in a note that it "looks like a whitewash and the initial reaction is one of scepticism on the part of the markets."
ING bank analyst Chris Turner said the CEBS announcement "does not appear to have uncovered any 'skeletons in the closet'," but added: "Whether it goes far enough remains to be seen."
The report spared all the banks examined in debt-laden Portugal. Greece, which sparked fears for the stability of the entire eurozone and was rescued by an EU and IMF bailout, also got off lightly with just one bank failing.
Another focus of concern in Europe, Ireland, saw its banks also pass the CEBS's key measure of so-called Tier One capital ratios, as did Italy. French and British banks likewise emerged with passing grades.
CEBS insisted the stress tests were "a substantial and severe test, both in macroeconomic terms and in financial terms," Vitor Constancio, vice-president of the European Central Bank and a CEBS member, told a news conference.
The head of the EU executive commission's financial affairs division Marco Bruti said: "We have always maintained that the bulk of the banking system in the EU is sound, and this is confirmed now by the stress tests."
The Tier One ratio measures core capital against outstanding assets, such as loans. A key test was the effect a government debt crisis would have on banks' balance sheets which hold large amounts of government bonds.
Banks must maintain a minimum ratio of 6.0 percent while a surplus reassures investors the bank is not likely to run suddenly short of cash. The CEBS calculated the seven banks would see this ratio fall below six percent.
The CEBS estimated by the standard of its test that the total potential damage to balance sheets at the 91 banks -- which account for 65 percent of the European banking market -- would be 566 billion euros (727 billion dollars) over two years if certain tough conditions hit.
The scale of this crash test is more than twice the amount injected into EU banks at the height of the financial crisis.
"We welcome today's publication of the results of European supervisory bank stress tests, which have been a major undertaking and represent an important step toward improving transparency and bolstering market confidence," said IMF managing director Dominique Strauss-Kahn.
"The publication of the results and the actions that have been announced to address bank capital deficiencies promise to significantly strengthen the European financial system," he added.
US Treasury Secretary Timothy Geithner also welcomed the release of the results, saying the EU "has made a significant effort to increase disclosure on the conditions of individual European financial institutions and enhance market stability."
US stocks extended gains Friday in cautious trading as Wall Street digested results of the stress tests.
The Dow Jones Industrial Average climbed 102.32 points (0.99 percent) to end the week at 10,424.62 after a gain of nearly two percent, or 200 points, a day earlier on better-than-expected earnings of key US companies.
The tech-rich Nasdaq composite index rose 23.58 points (1.05 percent) to 2,269.47 and the broader S&P 500 index added 8.99 points (0.82 percent) at 1,102.66.
The tests were the first time such an insight into the secret entrails of leading banks has ever been published in Europe.
If markets judge the tests too weak, analysts have warned the result could be to undermine or even negate the exercise, which aimed to remove uncertainty.
If the criteria pass the market test, then doubts about the solvency of the European banking sector will be dispelled. Banks will step up lending among themselves and, more importantly, to businesses and the economy at large.