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UK banking sector still under a cloud

While Royal Bank of Scotland shares increased today they were the only benefactors in the UK banking sector after a very downbeat report regarding bad debts. Amid suggestions that Royal Bank of Scotland will be able to spin off a number of overseas activities to pay down its current debt pile, other banks were not so lucky with the likes of Standard Chartered, HSBC and Barclays coming under pressure.

Many people believe that the current enthusiasm for the UK banking sector may well be a little premature as we are yet to see a crystallisation of all losses on loan books across the board. It will be interesting to see how the short to medium term pans out because many people believe that there is more short-term pain to come in the property sector and unemployment is set to rise even further. This will place yet more pressure on UK banks and is certain to see an increase in bad debt write-offs.

Perhaps this is part of the reason why the UK banks have not been forthcoming with increased liquidity at a time when the government and the Bank of England has been injecting more capital into the market.

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