By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European banks rallied at the open on Monday after the European Central Bank and the European Banking Authority said most of the region's lenders passed stress tests.

Shares of Commerzbank were up 5.6%, one of the biggest gains in the Stoxx Europe 600 index . Banco Popular Español SA rose 2.5%, Deutsche Bank AG (DB) climbed 2.2%, and UniCredit SpA added 1.7%. All those banks were among the lenders that passed the ECB's stress tests, an indication the central bank believes they are strong enough to weather a financial storm.

Twenty-five banks flunked the test, as they face a capital shortfall of 24.6 billion euros ($31.2 billion). However, 13 of those lenders have already taken steps to beef up their capital buffers.

The rally for banks helped lift European benchmarks in early Monday trade, with the Stoxx Europe 600 index up 0.4% to 328.47.

Germany's DAX 30 index gained 0.6% to 9,038.10, while France's CAC 40 index added 0.4% to 4,146.33. The U.K.'s FTSE 100 index picked up 0.4% to 6,412.79. British banks were not subject to the ECB's stress test, but were instead assessed by the EBA. All four U.K. banks in the test were given a green light, although Lloyds Banking Group PLC (LYG) only narrowly passed.

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