In spite of a rise in bad loans, the cost of funding for Europe's banks fell 38 per cent last year, according to the iTraxx senior financials index, which measures the cost of insuring against bank default.
Funding costs have continued to fall this year as banks exploit record low-interest rates by tapping into investor appetite for higher-yielding assets and issuing large numbers of bonds.
The turnround has been remarkable for banks on Europe's periphery, many of which received billions of euros in state aid during the eurozone sovereign debt crisis, where issuance has increased by 72 per cent year-on-year, according to Dealogic, the data provider, following big increases in 2013.
Read MoreItaly's big banks in US talks over bad loans
Banks' impairment reserves, which are meant to cover loan losses, rose 7.5 per cent last year to €570bn, according to Fitch. European banks such as those in Italy have increased provisioning still further this year ahead of the stress tests by the European Banking Authority.
"Problem loans have a direct and material effect on a bank's results, regulatory capital reporting and market valuation," said Mr Bryks. "In light of the upcoming asset quality review a lot of banks thought it was a good time last year to recognise bad loans and avoid nasty surprises."
Spain, meanwhile, issued its first ever inflation-linked bond on Tuesday, raising €5bn for the inaugural "linker" after banks on the deal were flooded with more than €20bn of orders despite concerns over subdued eurozone inflation.
Follow us on Twitter: @CNBCWorld