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EU ruling does not bode well for Lloyds and Royal Bank of Scotland

EU regulators have today confirmed that Dutch bank ING will need to down size its balance sheet in order to take account of state aid which was received when the company was in dire straits. This comes at a time when Lloyds bank and Royal Bank of Scotland are awaiting a ruling on UK government state aid and any potential reduction in the size of the businesses and any asset disposals.

While there had been a number of scare stories just a few weeks ago, many people believe they were just this and the issue would be resolved amicably leaving Lloyds bank and Royal Bank of Scotland relatively untouched. However, it would appear that today's news regarding ING is not good for Lloyds or Royal Bank of Scotland although we await official confirmation of the EU ruling in due course.

It now seems highly likely that the two banks will be forced to sell off a number of UK branches and possibly water down some of their investment operations. The problem for the banks is that would-be buyers are well aware the banks have been forced to sell these assets and will obviously look to buy them "on the cheap". This could turn into a disaster for the UK government, UK taxpayers, Royal Bank of Scotland and Lloyds bank.

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