A majority of Europe's banks have suffered a jump in bad loans even as investors lined up to lend them money, according to a study by Fitch, the rating agency.

Impaired loan volumes rose 8.1 per cent in 2013 to slightly more than €1tn compared with the year before, said the Fitch analysis, which used banks' financial results for the years ending 2012 and 2013.

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"It's a dose of realism," said Robert Montague, senior banks analyst at ECM, an investment manager. "It reflects the fact that banks were under-recognising and under-provisioning for bad loans, mostly in periphery countries but not exclusively." Ahead of a regional assessment of banking assets later this year European regulators are set to adopt a strict classification system, which seeks to eliminate national differences over what constitutes a problem loan. More from the Financial Times:

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Regulators must act on coco bond risks Fitch surveyed a hundred banks due to be assessed by the European Banking Authority. Twenty-nine saw the number of impaired loans rise by more than 20 per cent as their asset quality deteriorated, while one-third of banks saw their bad loan volumes fall or stay the same. "The increases were caused partly because of a switch to a more conservative loan classification and partly due to a deterioration in the quality of banks' assets," said Michal Bryks, financial institutions director at Fitch.