Two of the three big ratings agencies have outlined their respective 2019 outlooks for the global, regional and local banking sectors in special reports. Upward pressure on costs is a central theme in both documents, based on factors such as regulation, conduct, funding, investment needs, as well as higher capital and liquidity standards."Externally, economies and banking systems face challenges from tighter financial conditions, and spillover effects from trade tensions as well as slower growth in China," said Fitch Ratings.S&P Global Ratings said it expected banks to face more market volatility in 2019 from policy uncertainty and the rollback of monetary easing.Regulation remains a common threat to the sector in all regions: "The high tide of prudential regulation was reached with the finalisation of Basel III in December 2017. Instead, we now see the risk of delayed or uneven implementation of agreed global standards in some of the main jurisdictions," S&P noted. "A series of bank money-laundering cases in some European countries (Latvia, Denmark, Malta, Estonia, for example) is likely to push regulators to strengthen their regulation and supervision," said S&P.The credit cycle, too, will turn sooner or later, although the improved balance sheet soundness built up in many banking systems should moderate the impact."We expect banks' asset quality to slightly worsen over the next two years due to tighter lending conditions and corporates refinancing at higher interest rates," said S&P Global Ratings credit analyst Emmanuel Volland. The monetary policy shift could lead to an abrupt repricing of risks in financial markets and a correction in some housing markets - for example, Canada, Australia, China, Hong Kong, and New Zealand.                                                                                                             Australia also has its own set of problems to deal with: "Earnings growth is likely to be subdued due to pressures on interest margins and lending growth, and possible costs emerging from the Royal Commission into misconduct in the financial services industry," said S&P.Likewise, Fitch maintains Australian banks' earnings are likely to fall further in the near term. This will be due to slowing mortgage credit growth, especially in the residential mortgage segment; further remediation and compliance costs associated with inquiries into the financial sector; higher wholesale funding costs; and rising loan-impairment charges."Intense regulatory and public scrutiny of the sector, as well as strong competition, may make it difficult for the banks to reprice loans and pass on increases in wholesale funding costs, as evident from the latest financial results," Fitch warned. However, while economic imbalances remain elevated in Australian, S&P said "low credit growth and small falls in house prices in the past year, along with our expectation that credit losses will remain very low, suggest an orderly unwinding of risks."NIMs are therefore unlikely to improve in the short term, although slower mortgage growth can be partly offset by an increase in business credit growth.Thus far, New Zealand's banks appear to have been able to re-price to maintain profitability, but their ability to continue this in a low-growth, low-interest-rate environment is decreasing, Fitch said.Further, the agency is of the view