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European commission issues guidelines for European banks

In a move which is sure to upset the UK authorities the European Commission has today issued guidelines for EU member states with regards to European banks and those with potentially explosive toxic assets on their balance sheets. The EC believes that these banks should either be wound down in a formal prearranged manner or restructured for the future. It would appear that the European Central Bank and the EC are looking for a larger role in the overall regulation of European banks, something which will not go down well with the UK government.

This comes at a time when the UK government is looking at ways of transferring potentially toxic debts away from the balance sheets of leading UK banks as a way of increasing liquidity and solidifying their asset base. There is the potential for the UK authorities to pursue a policy which could be against the guidelines issued by the European Commission and potentially cut off any European state aid which the UK government may require in the future.

There have been suggestions that the UK government will need to "tap" the International Monetary Fund at some point in the future but the current toxic debt policy of the UK government could throw this potential lifeline into jeopardy.

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