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US banking sector under pressure

A report into the US banking sector has cited concerns among regulators that Citigroup and Bank of America may need to raise more capital to ensure their long-term future. The so-called "stress tests" which banking regulators around the world have been carrying out over some time have apparently shown that these two banks need to raise more capital in the short term.



Shares in both banks were down in early trading after the report was issued although it must be stressed that the report is not official and has come from "inside sources". It is also worth remembering that while two banks are said to have failed the stress test, a total of 17 banks passed the test. After a period of relative calm in US markets and hopes of a recovery in the economy the last few days have been something of a wake-up call to optimists.



While there has been a general improvement in confidence around the world, prior to the swine flu outbreak, the damage inflicted upon the banking sector will take many years to repair and work through the system. A return to pre-credit crunch growth rates are some way off with many believing the worldwide economy could be subdued for the next decade.

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