The EU took a step forward last week in creating a banking union, which is seen as key to averting future financial crises. Although EU financial services chief Michel Barnier forged an agreement last week on winding down collapsed banks without burdening taxpayers, many hurdles still exist.
The Basel Committee on Banking Supervision's decision to give global banks an additional four years to meet liquidity requirements was aimed at ensuring the change wouldn't discourage lending to the real economy. Some banks have already benefited from the revision, with their share prices increasing. However, the move could prove costly for financial institutions, analysts say.
During the past year, regulators have clashed publicly and privately over harmonizing rules from different countries. In 2013, it will be crucial for negotiators to establish a framework to resolve extraterritoriality issues concerning areas including derivatives trading and capital requirements, Michelle Price writes.
Europe's largest banks are expected to continue deleveraging balance sheets in 2013. Consequently, investment bankers do not anticipate much debt issuance from the financial-services sector. Debt securities issued by banks in 2012 declined 7% compared with 2011, according to Dealogic. Sebastien Domanico of Societe Generale says banks have reduced balance sheets on average about 30% during the past three years.