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KPMG warns of more losses for high-street banks

Accountants KPMG have today issued a damning report on the UK banking sector with a belief that bad loans will remain a significant issue for high-street banks for the foreseeable future. A weakening employment market and a property sector which has show signs of life, although never seems to turn the corner could be the catalyst for further large write-offs by the U.K.'s leading banks.

Already under pressure for not increasing liquidity in the mortgage market, UK banks could be squeezed from both sides if as expected bad loan provisions continue to rise and high-street operations suffer a further deterioration in trading. This is likely to have a major impact on the business arena with UK banks unlikely to release further liquidity until they see signs of improvement in trading.

It is difficult to see how or when UK banks will be able to increase liquidity in the consumer and business sectors because ultimately with further bad debts expected the trading environment does not encourage further investment. Maybe the recent move by the Bank of England to increase the quantitative easing fund by £50 billion is something which is required to support the UK economy in the short to medium term.

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