One of Ireland’s leading banks, with more than one million customers, has failed the European Central Bank’s EU-wide stress test.

Permanent TSB’s failure to pass the financial health test has led to assurances from both Ireland’s finance minister and the country’s Central Bank that it will survive.

The ECB examination found a €854.8m (£673m) hole in Permanent TSB’s reserves.

But finance minister Michael Noonan pointed on Sunday to the fact that all of the Republic’s other pillar banks – Allied Irish Bank, Bank of Ireland, Ulster Bank and Merrill Lynch International Bank – were given a clean bill of health.

On Permanent TSB’s prospects, Noonan said: “I am supportive of Permanent TSB’s plans to raise capital from private investors given the taxpayers investment in the bank, the importance of the bank to the economy, its customers (performing and non-performing) and its 2,200 staff.

“My officials will review any proposals made by Permanent TSB and will work with Permanent TSB and other stakeholders to ensure a successful execution of the capital plan in 2015”.

Irish and European taxpayers pumped billions of euros into Ireland’s banks following the financial crash of 2008-2009. Many Irish financial institutions were dangerously overstretched after reckless borrowing – mainly to property speculators and builders during the Celtic Tiger boom years.

On the apparent recovery of Irish banks – the majority of them still in state hands – the Irish finance minister said: ”The comprehensive assessment was a strict and comprehensive examination of the European banking system and the results for the Irish banks highlight the strength of the banking system and the significant progress that has been made since 2011.”

Deputy governor of the Central Bank of Ireland Cyril Roux echoed the minister’s claim that the results demonstrated progress in the Irish banking sector.

On Permanent TSB, Roux stressed that there would be “no adverse impact on the day-to-day operations of any of the banks and no impact on consumers.”

The bank has already met the Central Bank and is being given around nine months to raise the capital needed to plug the financial gap in its reserves. It has two weeks to play out its plans to the ECB about how it can recapitalise.

The group’s CEO Jeremy Masding said they are looking to bring international investors on board to help the bank to raise the capital required.

In a message to its 1.2 million clients across the Republic, Masding added: “Customers are unaffected by these tests and are not required to do anything as a result of today’s news.”