Europe's main stock markets fell on Monday as investors took profits from big gains last week, but bank shares surged after a top rule-setting body said it would relax its asset requirements for the sector.
At the beginning of the first full trading week in 2013, London's benchmark FTSE 100 index of top companies dipped 0.30 percent to 6,071.75 points, Frankfurt's DAX 30 index dropped 0.37 percent to 7,747.19 points and the Paris CAC 40 fell 0.37 percent to 3,716.04.
The euro nudged down to $1.3043, which compared with $1.3067 late in New York on Friday. Gold prices firmed to $1,653.96 per ounce on the London Bullion Market, from $1,648.
"European markets have come into a consolidation phase," said analyst Anita Paluch at trading firm Gekko Global Markets.
"Investors booked profits after last week's strong gains, though banking shares gained as the Basel Committee watered down the drastic measures and extended the deadline for banks to create the buffer by four years.
"There is little inspiration on the economic front today and the European Central Bank meeting on Thursday will be definitely eyed."
Equities had rallied sharply last week in holiday-shortened trade after US lawmakers clinched a deal to avert a much-feared "fiscal cliff" of drastic tax rises and automatic spending cuts.
Over the weekend, meanwhile, the Basel Committee on Banking Supervision announced it would give banks and financial institutions more time to meet global liquidity rules scheduled to begin in 2015.
The rules are aimed at improving the banking sector's ability to survive any future financial crises.
The Basel committee -- the world's top banking regulatory body -- said on Sunday that it would relax the severity of new rules which will requir them to increase their holdings of assets that can be sold quickly in times of stress.
In reaction to the news, Europe's major banking companies shot higher in Monday morning trade.
Barclays soared 3.45 percent to 286.25 pence and Lloyds Banking Group leapt 1.10 percent to 50.4 pence in London.
Across in Frankfurt, Deutsche Bank stock won 3.38 percent to 35.965 euros and Commerzbank rallied 2.64 percent to 1.557 euros.
And in Paris, Credit Agricole advanced 3.68 percent to 6.588 euros, BNP Paribas gained 2.07 percent to 45.305 euros, while Societe Generale increased 2.47 percent to 30.055 euros.
"The Basel committee decision to allow banks more time to meet their capital targets is lending some support to financials this morning," said Mike McCudden, head of derivatives at online stockbroker Interactive Investor.
"Furthermore, with banks being allowed greater flexibility than anticipated, this softer approach from Basel will boost banking profits and is being greeted with some relief by investors."
The Basel III standards had been initially proposed in 2010 but banks and financial institutions have since lobbied intensively to make the rules more flexible and result in lower costs for the sector.
The details of the Liquidity Coverage Ratio (LCR), which was drafted to avoid a repetition of the 2008 banking crisis and unanimously endorsed on Sunday by the Basel group's top oversight body, give the banks a reprieve.
Its provisions include a much broader definition of the minimum assets every bank needs to hold, making it less costly for them to maintain the required buffer.
Asian markets mostly fell on Monday as last week's hefty gains prompted profit-taking, overshadowing Friday's Wall Street rally and upbeat US job creation figures.
Tokyo stocks -- which on Friday hit the highest level since before the quake and tsunami of March 2011 -- slipped 0.83 percent in value.
Hong Kong finished flat, but Shanghai closed up 0.37 percent, with traders optimistic about upcoming data, including inflation and trade figures, due out of Beijing soon.