Banks are cutting their balance sheets at the slowest pace since the eurozone financial crisis in a sign of growing confidence in the region’s economic recovery.

The collective size of the region’s balance sheets dropped by €200bn to €31.5tn from August to November last year, according to the European Central Bank. The decline is the smallest three-month fall since banks began cutting assets in earnest from May 2012, when those assets reached an apex of €34.8tn, or more than three times the eurozone’s gross domestic product.

“The fact that deleveraging has slowed down is good – investors are more confident and it shows banks are raising capital rather than cutting loans as the economy recovers,” said Alberto Gallo, head of European credit research at Royal Bank of Scotland.