Banks in some of Asia’s biggest markets are ahead of their European peers in two important ways – they have plenty of capital and they have already implemented the Basel III bank capital rules drawn up in response to the financial crisis.

The danger now, however, is that they could be caught napping over the issuance of new junior bonds that are compliant with the Basel III rules. Although European regulators have yet to finalise and implement their version of Basel III, Europe’s banks are ready to pull the trigger on some hefty issuance of bonds designed to comply with these rules.

Banks have hitherto relied almost exclusively on wealthy individuals in Asia to buy these deals, as their institutional counterparts struggle to fully understand and properly price the risks. But bankers warn that the individual Asian clients of private banks will not keep buying these deals forever – latecomers may have to pay a lot more for their capital as a result.