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Do we need a commercial state run bank?

Despite the fact that the UK government, and indirectly UK taxpayers, have significant stakes in Royal Bank of Scotland, Lloyds bank, Northern Rock and the "bad bank" of Bradford and Bingley the UK government has no direct control over these operations. While on the surface these may seem like state-run banks they are effectively banks run at an arms length distance from the UK government - which owns all or has a significant stake in the companies in question. But is it now time for the introduction of a commercial state run bank?

There's no doubt that various attempts to influence the UK banking arena with regards to liquidity in the mortgage market, small business arena and medium-sized business sector have ultimately fallen upon deaf ears. If the UK government was to introduce a state-controlled bank into the commercial sector this may well see UK banks sit up and take more notice of instructions from the Bank of England and the UK government in the future. However, there may well be conflicts of interest and the introduction of a state-controlled bank into the commercial arena could upset the traditional market structure.

There is no doubt that the UK government and the Bank of England will have to take drastic action unless the UK banking community is more forthcoming with liquidity for UK businesses and UK consumers in the short to medium term.

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