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UK banks still short of capital

In a disappointing move for the UK banking sector and the UK government, the Bank of England still believes that many UK banks are still short of capital adequacy. This is despite the fact that billions upon billions of pounds of taxpayer's money has been poured into the sector, with little return as yet. So what exactly is going on?

While it would be wrong to suggest that the UK banking sector is again on the verge of collapse, it would appear that the relative strength of many of the U.K.'s leading banks may need a short to medium term boost. Whether this involves an expansion of the UK government quantitative easing program or further investment by a mixture of shareholders and the UK government remains to be seen. However, when you consider the significant changes over the last few months, it is no surprise to see that many banks may need "topped-up" to ensure they could survive any significant downturn in the short to medium term.

This announcement by the Bank of England comes after stress tests in the US identified significant underfunding across the sector, something which many people expect to be duplicated in the UK.

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