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Is the UK banking sector over the worst?

Over the weekend there has been yet more speculation regarding potential fundraisings in the UK banking sector with Royal Bank of Scotland the latest target with talk of a £4 billion rights issue. Just when it looked as though the UK banking sector was over the worst many are now concerned that fund-raising exercises are being lined up by a number of banks looking to take advantage of the recent recovery in share prices to strengthen their balance sheets. So is the UK banking sector over the worst?

While there is no doubt that great strides have been made in the UK banking sector over the last six months, there is a feeling that much work is still to be done and too many people are looking towards a blue sky scenario. Let us look at the facts, mortgage lending is still relatively low, savings rates are still relatively low, balance sheets have never been weaker and the UK banks are currently fighting a multibillion pound court case regarding overdraft charges. Any further weakness in UK bank balance sheets could send some investors running for the hills and potentially pose more financial problems for the sector.

While many people believe the worst is over, with the recession upon coming to an end, is there a sting in the tail?

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