European banks are struggling to shake off the effects of a series of economic crashes - bad debts worth €1tn weigh down their balance sheets.

A report from the EU's European Banking Authority (EBA) which analysed the finances of 105 banks in 21 countries warns that 6% of all loans are not being repaid. The corresponding figure in the US is closer to 3%.

In Cypriot banks over half of all loans are classed as non-performing - this compares to only 2.8% in the UK.

Ireland has the third highest rate with 21.4% of the Irish banks' loans not performing.

These bad loans are eating into bank profits and affecting their ability to lend to businesses and customers on the high street.

“The increase in lending has been accompanied by a very gradual improvement of asset quality, although levels of non-performing exposures in EU banks remain a concern and a potential impediment to lending growth and profitability,” the report said.

Of the larger economies in Europe Italian banks produce the most worrying stats, with 16.7% of loans not performing.

Sweden is given the cleanest bill of health with only 1.1% of its loans classed as non-performing.

This study “demonstrates an increasing resilience in the EU banking sector as capital levels have strengthened further”, according to Piers Haben, the EBA’s director of oversight.

He continues, “Nonetheless, EU banks will need to continue addressing the level of non-performing loans which remain a drag on profitability.”