Europe's banks are being told to increase their capital by a total of 114.7 billion euros, more than predicted two months ago, to make them strong enough to withstand the euro zone debt crisis, two financial sources told Reuters on Thursday.

The estimated capital shortfall is almost 8 percent higher than the 106.4 billion euros estimated in October due to increases for banks in Germany, Italy, Austria and Belgium, the sources said citing figures from the European Banking Authority (EBA).

The EBA, which is due to release the data at 1700 GMT on Thursday, declined to comment.

The shortfall for German banks, after including a sovereign capital buffer is 13.1 billion euros, up from 5.2 billion estimated in October, the sources said.

Banks in France will need 7.3 billion euros, banks in Spain will need 26.2 billion euros and banks in Italy will need 15.4 billion euros, the sources said.

The banks have until January 20 to present their plans for recapitalization and need to fulfill the capital requirements by end-June, they said.

Banks will look to fill any shortfall by raising cash from rights issues, shrinking loans to customers or selling assets. National governments may have to bail out any lender unable to find the cash.

The EBA's recapitalization plan is part of a three-pronged approach -- also dealing with sovereign debt exposures and improving funding guarantees -- that it hopes will restore confidence without crimping lending in a fragile economy.

The European Central Bank on Thursday said it would start offering banks funding for 3 years for the first time ever, to try to head of a credit crunch.

EU leaders will meet later on Thursday in a high-stakes summit aimed at agreeing a plan to defuse the crisis, with France and Germany pushing for rule changes to stricter budget discipline in the bloc.

($1 = 0.7468 euros)

(Reporting By Frankfurt Bureau; Editing by Andrew Callus)

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