Are UK bank's strong enough to survive?
With allegations that two US banks have failed the regulators "stress test" hitting the market there are concerns that UK banks may well fall foul of capital adequacy regulations. As ever, any concerns in America soon travel overseas to other major markets and many are bracing themselves for volatility in the UK banking sector. However, the truth is that with the exception of the Dunfermline Building Society, which was highlighted by the regulator stress test, there would appear to be no concerns with regards to other UK financial institutions.
Unfortunately, as we saw with Northern Rock, fear can often lead to a drop in confidence which can have disastrous consequences for financial markets. All eyes will be on the next banking reporting season which is not too far away when we will get the full extent of past problems and forecasts for the immediate future. Any slight glimpse of concerns within the UK banking sector would be multiplied by investors who are still very wary even though confidence has picked up over the last few weeks.
The recovery in the UK economy is highly unlikely to be straightforward and those expecting a V shaped recovery, such as some in the government, are likely to be disappointed.
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