Basel has examined bank capital ratios, and found twice as much fiddling. The first of two key studies by the global watchdog confirms what many investors have long suspected: lenders reach vastly different conclusions about the riskiness of the same portfolio of trading assets. But Basel has also found that supervisors differ in their conservatism, too. To restore faith in bank capital, both will have to be brought into line.

A slight oversight

Business Standard

Michel Barnier has picked a good battle to fight. Europe&rsquo;s audit industry is an oligopoly, dominated by the Big Four: KPMG, Ernst &amp; Young, Deloitte and PwC. In EU states, they audit 85 per cent of listed companies. But draft proposals from the European Commission&rsquo;s internal markets commissioner are not all they might be.

Called to account

The European Central Bank has revealed the hierarchy of bank pain in the euro zone. Just seven euro zone countries have signed up to take part in the central bank's looser collateral rules for lenders. The good news is that the ECB can now aim its cheap three-year loans at the countries where they're needed most. The bad news is that the recipients may not appreciate the exposure.

Carry on collateral

Barclays has made things difficult for itself. Next month, the UK bank will reveal the size of Chief Executive Bob Diamond&rsquo;s annual bonus. One powerful way to show he deserved it would have been to produce a stellar performance for 2011. Unfortunately for Diamond, he will have to find another justification.

Many unhappy returns

Aviva needs a shot in the arm. On the one hand, the UK insurer has dominant positions in the UK and some regions of Europe, and is meeting its return targets there. But the group also looks relatively undercapitalised and undervalued, and lacks the kind of appealing growth story enjoyed by its rival, Prudential. With new chairman John McFarlane just about to join, the sale of Aviva&rsquo;s North American operations could herald a much bigger spring clean.

Shorn in the USA

Prudential&rsquo;s threat to jump ship is real. The UK insurer has admitted that new European Union reforms were forcing it to re-examine its London headquarters. Playing the relocation card is a standard threat for companies faced with unhelpful rules. But even though the other benefits of moving are negligible, the risk to Pru is genuine.

Prudent move

When Germans take on Brits at soccer, the Germans tend to win. Not so for the countries&rsquo; largest investment banks in the first quarter of the year. Yet Deutsche Bank and Barclays&rsquo; fortunes could yet converge.

Trading places

Greek banks are in suspended animation. The stricken state&rsquo;s lenders had been waiting for elections on May 6 to deliver not only a new government, but also much-needed details on how they will be recapitalised. Instead, domestic political deadlock means they will have to wait another month for a new election. In the meantime, deposit flight has accelerated. The country&rsquo;s president revealed that depositors had taken euro 700 million out of the system on Monday alone.

Achilles heel

Britain is an island and doesn&rsquo;t use the euro. But it will not be able to avoid the fallout if the euro explodes. The good news is that both the government and the Bank of England (BoE) realise that a break-up of a single currency is a real possibility. David Cameron, the prime minister, openly speculated on Wednesday about a break-up. Meanwhile, Mervyn King, the BoE&rsquo;s governor, confirmed that the authorities have been discussing contingency plans &mdash; in particular, what banks should do to protect themselves.

Be prepared

Europeans need to hold their nerves on Basel III. Brussels is preparing to follow the lead of the US regulator and delay the formal implementation of global banking reforms, which is due to go ahead in January. It should make sure the delay is short.

Basel Faulty

Spain&rsquo;s bank haircuts are part bail-in, and part bail-out. The indebted government has lopped 10 billion euros off its euro zone-funded bank rescue bill by cutting the value of its worst lenders&rsquo; hybrid debt. Yet if it hadn&rsquo;t been for political considerations, the burden-sharing might have been greater.

Some pain, some gain

Standard Chartered has found a new way to exploit an old advantage. Since the 2008 financial crisis, the emerging markets lender has made considerable hay trumpeting strong growth in its Asian markets. But even investors worried about a slowdown can take comfort from the fact that StanChart is taking a bigger slice of the cake.

Asian airbag

The great UK bank capital probe puts heat on Royal Bank of Scotland. The Bank of England warned on November 29 that the domestic banks it regulates may not be setting aside enough to deal with future losses. Making definitive judgments about who this affects isn&rsquo;t easy. RBS won&rsquo;t be the only to attract attention. But the state-dominated lender could well find itself fielding some of the first questions.

Provisionally creaking

Deutsche Bank is battling to move on from 2008 and the heart of the financial crisis. Former employees of the German bank allege it hid $12 billion of losses as the credit crunch hit. It reopens the debate over whether marking shaky assets to model was actually marking to myth - and whether it mattered.

Grey areas

Europe&rsquo;s banking union could reignite cross-border bank mergers. Spooked by financial and Euro zone crises, national regulators have pressed their charges to retrench to domestic markets. But the arrival of a single supervisor and central bailout fund could revive the M&amp;A frenzy seen earlier in the decade.

Bank to the future

Few executives had a worse 2012 than Bob Diamond. The ex-Barclays chief executive started the year running one of the few UK banks without a big government stake, and spearheading a drive to make banks better citizens. He ends it having been forced out following a perfect storm of shareholder revolts, regulatory ire and, most notoriously, Libor.

Diamond out of the rough

Global regulators&rsquo; great liquidity U-turn is a sell signal for banks. That&rsquo;s not the way investors chose to look at it on January 7, as the share prices of global lenders rallied. Admittedly, the watering down of rules intended to protect banks against deposit-runs will mean higher short-term profit. But the economic slowdown that has caused formerly macho regulators to roll over is a more enduring negative force.

Watering down the hard stuff

Spain is doing its Don Quixote impression again. The troubled euro state&rsquo;s latest attempt at shoring up trust in its imploding banking system was supposed to be the final one. Madrid was expected to pump enough capital in its lenders to lay concerns to rest. But the rosy assumptions chosen by the government are still too close to Cervantes&rsquo; ever-dreaming literary character.

Quixote ugly

Spain remains intent on cutting corners on its long-awaited bank bailout. The country has been promised up to euro 100 billion to recapitalise its ailing lenders. It&rsquo;s looking worryingly like it will try everything to minimise the headline number. The country&rsquo;s government obviously doesn&rsquo;t get that it must be conservative to be credible.

Half baked

Which is the best private sector organisation to fix Libor? Barclays, the wags will no doubt reply. But for the committee tasked with replacing the British Bankers&rsquo; Association as the benchmark&rsquo;s administrator, it is a serious question - and one that will focus attention on how the new body will get paid.

Fix-up job

Barclays at long last came out with some good news. The UK bank on Thursday said it had chosen David Walker to be its next chairman, replacing Marcus Agius. Following a disastrous summer in which regulators exposed attempts by Barclays to manipulate Libor, it&rsquo;s a solid first step towards repairing its battered reputation.

George Hay