FRANKFURT — Europe’s far-reaching review of banks set off sharp drops in the shares of Italian lenders Monday after several of them failed the yearlong exercise’s test of financial strength.
Investors and analysts sifted through the huge amounts of data released Sunday by regulators. Initially, bank shares rose on apparent relief that the continent’s largest banks were found to have adequate finances, but then fell, led by a plunge in Italy’s bank Monte dei Paschi di Siena. It had the biggest capital gap to fill among the 13 banks that flunked.
The key banking index, the Stoxx Europe 600 Banks, fell 1.73 percent amid a decline in the broader market.
Though most of the banks that failed the review were in Europe’s economically weaker countries, the results raised questions about several banks in Germany. Although they passed the main test, they fell short on a tougher measure of financial strength to be applied in the future.
The review, by the European Central Bank and the European Banking Authority, first checked the value of bank loans and holdings. Then their finances were subjected to a stress test to simulate how their finances would hold up in a downturn.
In all, 25 banks failed, nine of them from Italy. But many had raised capital in the months since the review began at the end of 2013. As a result, 12 of the 25 had already covered the financial gaps found by the review, and several of the remaining 13 had only small amounts to raise.
The test was aimed at restoring confidence in eurozone banks. It paves the way for the ECB to take over Nov. 4 as the main banking supervisor for the countries that use the euro.
Shares in Italian bank Monte dei Paschi di Siena, which had the biggest capital shortfall at $2.67 billion, plunged 21.5 percent. The bank’s board met Sunday and said it had hired advisers to ‘‘explore all strategic alternatives.’’
After racking up losses on Italian sovereign debt during the eurozone’s financial crisis, Monte dei Paschi di Siena started a five-year recovery plan that included a $4.95 billion bailout and $16.5 billion in state guarantees. It has been under added scrutiny after disclosures that it hid losses.
Other banks found to need smaller amounts of capital were Banca Carige, Banca Popolare di Milano, and Banca Popolare di Vicenza.
The result ‘‘puts a cloud above the Bank of Italy’s reputation as a supervisor,’’ analyst Nicolas Veron of the Bruegel think tank in Brussels wrote in an analysis.
Germany’s big banks, Deutsche Bank and Commerzbank, both passed. But several smaller ones — HSH Nordbank, DZ Bank, and WGZ Bank — passed the basic test but fell short on a tougher measure of capital adequacy that in coming years will be phased in under an international agreement called Basel III.
HSH Nordbank has specialized in ship finance, a business hit hard by losses and bad loans. The bank remains in compliance with current capital rules.
CEO Constantin von Oesterreich said the test ‘‘confirmed that HSH Nordbank has a solid capital base in the present setting.’’
Veron called the results for the three smaller German banks ‘‘possibly the biggest surprise’’ of the entire test. He said ‘‘the fact that Germany and Italy, two of the euro area’s biggest countries, are not immune to the ECB’s inquisitiveness suggests that the assessment has been kept reasonably independent from political pressure.’’
The review is only part of a bigger range of actions that are needed to get the 18-country eurozone economy going, experts say.
The aim of the test was to force weak banks to improve their financial strength so they can lend to businesses, which would presumably invest and hire more.
But even ECB officials say that will only happen when demand picks up.
The latest indicators suggested that an upturn is not happening yet. Germany’s Ifo index of business confidence fell in October for a sixth consecutive month, underscoring the problem on Monday.