The state of Spanish banks represents the biggest worry. The country’s property bust is only halfway finished, if Ireland’s experience is anything to go by. Spain’s aggressive commitment to austerity and eye-watering unemployment rate are also major concerns, particularly when it comes to borrowers keeping up with their sizeable debt burdens.

For his part, Alfredo Saenz, chief executive of Santander, thinks that anyone citing mortgage delinquencies as a problem for the Spanish financial system is “saying something stupid”. It is difficult to explain, however, why Spain’s modest mortgage delinquency rate, at less than 3%, looks so out of sync with its extreme unemployment rate, at nearly 24%. A non-performing mortgage ratio on par with Ireland’s would boost the stock of dud housing debt in Spain nearly five-fold. A decline in loan quality on this scale would indeed push many Spanish lenders into a bail-out.

Limiting the rescue to the country’s banks—without also pushing the beleaguered sovereign over the edge—is the best case scenario for Spain, according to the Economist Intelligence Unit. To some, this makes us sound stupid. It is a risk we are willing to take.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

Only one company, the Pnomh Penh Water Supply Authority, listed its shares at the market’s April 18th opening. The stock closed the week with a gain of more than 60%, with 1.7m shares worth around 17trn riel (US$4.1m) changing hands. State-owned telecoms and port operators are next in line for listings, possibly later this year. A KRX official expects “dozens” of IPOs in Cambodia in the coming years. The Busan-based exchange operator is also eyeing Myanmar, where Japanese rivals have signed a preliminary agreement with the government to establish a new stock market by 2015. There is already a securities market in Yangon, but in its current state it won’t offer much competition.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

Besides weighty demand-side constraints—not least the euro zone’s economic woes—much of the blame for low prices lies with an oversupply of credits, which are set by quotas approved by the European Commission (EC). Around 60% of EU emissions permits are likely to be auctioned next year, strangling off the hitherto plentiful supply of free allowances. But given Europe’s struggles, the EC appears hesitant to radically raise the cost of polluting.

Those designing carbon trading schemes elsewhere—trading in California is due to start in 2013 and in 2015 in Australia—are mindful of Europe’s chequered history with pricing, Point Carbon notes. Hence, a fashion for imposing price floors and ceilings. This even extends to ETS participants: Britain’s government talks of setting a carbon-permit floor price as high as £70 by 2030.

Yet this is an inadequate fix for the political fissures undermining carbon markets. Many investors doubt governments’ resolve to follow through on lofty green goals. Global climate talks are stuttering, while most EU members missed a recent deadline to submit their plans for granting permits to companies, needed so that the EC can set the number of free permits it grants during the next phase of trading. The likely abundance of free carbon credits will neatly reflect a shortfall in political will.

The EIU's Energy Briefing provides ten-year forecasts and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.

But just because foreign investors are allowed to invest doesn’t mean that they will. India’s benchmark Sensex index shed 25% last year, while the rupee sank by 17% against the dollar. Over the course of 2011, foreign institutional investors withdrew a net US$358m from Indian equities.

In 2009 and 2010, much better years for Indian shares, net foreign inflows approached US$50bn. By widening the base of investors, India’s policymakers hope to usher in another era of robust foreign inflows. Recent reversals of reforms to foreign ownership limits in the retail and financial industries, however, raise thorny questions about India’s business environment. In this context, political opposition to the liberalisation of India’s stockmarkets is another cause for concern. Despite India’s undeniable growth potential, clear signs of a turnaround in Indian equity performance—and proof of the government’s sincerity in granting greater access to shares—are required before foreign investors will feel comfortable piling back into the country’s markets.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

The earthquake, tsunami and related nuclear crisis in Japan accounted for more than half of the overall disaster bill last year, and around 40% of all insured losses. A second large earthquake in New Zealand, floods in Thailand and a series of severe storms in the US rounded out a “very rare” confluence of natural catastrophes in 2011, according to Munich Re.

Even if last year was exceptional, a general trend towards more severe and unpredictable weather is evident. Over the past three years, the average annual tally of natural catastrophes is up by more than 40% versus the 30-year average. Average insured losses over this period are nearly three times the 30-year trend.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

After nearly two years of decline, November marked the ninth consecutive year-on-year rise in commercial and industrial loans. Lending growth in the third quarter, at a seasonally adjusted annual rate of almost 10%, registered the highest rate since the same quarter in 2008.

Still, the absolute level of business loans is 18% lower than its high in late 2008. And the ratio of banks’ cash holdings to loans remains well above pre-crisis levels. The last time we looked at this ratio, in January, American banks appeared to be opening the taps; the cash-to-loans ratio only briefly tipped above 100% before falling back.

Since then, as the euro debt crisis worsened and volatility reigned, lenders hoarded cash more enthusiastically than ever before. Although credit conditions may be easing, banks are hardly lending freely; lenders are setting aside US$1.16 in cash for every US$1 in business loans. This is down from an all-time high of more than US$1.50 in the summer, but hardly a sign of generosity on the part of loan officers.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

Now, as the financial crisis is entering a dangerous new phase, financial authorities in Austria—home to banks with sizeable operations in eastern Europe—are placing limits on foreign lending by domestic banks. Call it the Vienna Retreat.

Starting next year, Austrian banks must maintain a loan-to-deposit ratio of less than 110% at their foreign subsidiaries. (The ratio can also include local wholesale financing, but in practice this is not widely used.) Although the new ceiling applies only to new loans, few subsidiaries currently meet the requirement, suggesting that credit in these countries will be harder to come by in the future. But as the euro area crisis spreads to the monetary union’s core, including Austria, it seems the need to defend one’s own sovereign finances trumps any notions of regional solidarity.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

The impact of Europe’s woes on global growth is significant, not least via reduced demand for emerging markets’ exports. We expect global GDP growth, at purchasing-power parity, to slip to 3.3% in 2012, down from 3.8% this year (at market exchange rates, growth appears more modest). Rebuilding-related growth in Japan will support growth, but waning momentum in the US will dampen global prospects. Emerging markets will grow swiftly by comparison, but less swiftly than in previous years.

The biggest risk to this forecast is the outcome of the euro area’s financial crisis; a break-up of the currency union would produce a much deeper global downturn than we currently predict. (For more on our thinking about a potential euro break-up, see the special report “After Eurogeddon”.) In this context, growth that only narrowly avoids recession—the IMF considers global growth below 3% to represent a world recession—may not be such a gloomy forecast after all.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

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Although intended to combat capital flight, the measures appear to be exacerbating it. Double-digit inflation and a deteriorating current account are raising fears of a peso devaluation. The introduction of the new currency regime only a week after President Cristina Fernández de Kirchner was re-elected also suggests that further restrictions could be in store. Although a recent relaxation of reserve requirements for dollar deposits frees up a larger supply of dollars for banks, if savers continue to withdraw greenbacks at the current rate—some reports suggest that withdrawals have accelerated since the latest data was released—the pressure to impose stricter curbs on exchanging pesos for dollars will grow.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.