ECB President Draghi
ECB president Mario DraghiReuters

Twenty-five banks are to fail the European Central Bank (ECB)'s stress test, meaning they are ill-equipped to deal with financial crisis.

The official results of the ECB's analysis will be published on 26 October, but Bloomberg reporters, who have seen the results, announced that the number of failures is likely to be higher than expected.

Pimco, the investment management company, had predicted that 18 banks would fail the tests, with all of the Eurozone's biggest banks passing.

However Bloomberg's newswire implied that the number could be even greater than the initial 25, with negotiations over a further 10 banks ongoing.

It reported: "[The] number of banks that would have shortfall even after capital-raising to Sept 30, 2014, is the subject of ongoing talks, a person with knowledge of the matter says."

Markets have been sanguine ahead of the results. The euro initially fell on the news from Bloomberg, but has recovered. The FTSE Eurofirst 300 has been up 2.5% over the course of the week, with the MSCI Europe Banks Index rising 4.5% this week, or 8.5% on its 10-month low of last week.

The stress test looks at the ability of the single-currency's 130 largest banks to absorb financial turbulence.

While no official results are available, it is thought that Permanent TSB of Ireland, Banca Monte dei Paschi di Siena and Banca Carige (both of Spain), are among those banks to have failed. Analysts have also suggested that mid-tier Italian, Cypriot, Portuguese and German banks are in danger of failing.

The stress test will be seem as a barometer of the success of ECB policies around minimum capital-holding requirements and balance sheet strengthening.