Lenihan said Irish banks face a shortfall of about $43 billion, a fifth of the country's gross domestic product, the EUobserver reported Wednesday.
Lenihan, in a major speech, said the Bank of Ireland required $3.6 billion in fresh capital.
He called the bank's risk-taking "truly shocking," and denounced the industry for "fast and loose" lending.
Ireland has already set up an agency called the National Asset Management Agency as a so-called "bad bank" that will purchase toxic loans from banks at an average discount of 47 percent.
NAMA Chief Executive Officer Brendan McDonagh said, "All the good banking and lending principles went out the window," between 2004 and 2008, a period that included "an explosion" in lending.
Prime Minister Brian Cowen said, "It's time we actually recognized that this country couldn't be immune from those developments," referring to the financial meltdown that rocked most of Europe and the United States.
Notable deaths of 2014 [PHOTOS]