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EU set to target Royal Bank of Scotland

The EU Commission has today outlined a number of conditions with regards to the £20 billion in state funding which was received by Royal Bank of Scotland at the bottom of the economic cycle. As well as cutting back on the company's significant investment division, the EU commission has also confirmed that it will require at least part of the insurance operation to be sold, putting the future of Churchill, Direct Line and Green Flag at risk. It would appear that the EU has finally taken a decision with regards to state aid and the earlier banking crisis, with the impression it feels that banks should be made to feel more pain and not benefit overtly from state funding.

There has also been some mention of the asset protection scheme, the scheme set up by the UK government to basically insure potential toxic assets against further falls, with an indication that the previous £19 billion "first loss" attributable to Royal Bank of Scotland should be amended. The indication from the EU commission is that the £19 billion figure should be trebled which would effectively mean the bank having to raise more capital in the marketplace.

At a time when Lloyds bank is struggling to put together a financing plan for the future, it seems that Royal Bank of Scotland will soon be in a very similar situation.

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