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The banking pendulum swings back to positive

After revelations that US banks may not require additional funding from the US authorities, today saw a significant rise in the share price of many UK banks. This is the latest movement in the banking pendulum which appears to swing between negative news and positive news on a regular basis. While the growing opinion that US banks are fully funded for the future is most definitely a positive sign, is it really right to translate this euphoria to the UK banking sector?



While there was no doubt that the UK recession and the US recession have run along similar lines, a number of UK banking operations also have exposure to the US. A general pickup in the US banking sector will therefore influence a number of UK banks directly and indirectly, increasing liquidity in worldwide money markets. It is hoped that this renewed confidence will then allow those weaker banks to raise significant funding at a more affordable price in the future.



Stress testing of banks is being carried out all over the world and while the news from the US is good today this does not mean the news from other parts of the world will also be positive in the short to medium term.

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