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Will the UK Treasury dare to investigate the UK banking sector?

Alistair Darling's hint that the UK Treasury would instigate a competition enquiry into the UK banking sector as a whole unless lending liquidity was increased across the board has opened up a very interesting debate in UK financial markets. For many years the UK government and UK financial sector have worked hand-in-hand to fund government projects and increase economic activity within the UK. However, since the worldwide recession the UK banking sector has become public any number one and the distance between the government and the sector has never been greater.

While there was no direct threat of a competition enquiry into the UK banking sector, it seems as though banking leaders left the meeting under the impression that action has to be taken in the short to medium term. However, whether the UK banking leaders will actually fall in line after the latest government threat remains to be seen although on the surface it is very difficult for them to justify vastly increased profit margins in these most difficult of financial times.

Whether the UK government has pushed too hard this time remains to be seen but it looks as though we may experience a bloody battle between UK government and the UK banking sector in the short to medium term.

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