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Bank shares rally after Basel ruling

Despite the fact that there will be an almost tripling of the required capital backing for banks around the world as results of the Basel committee ruling it seems that many investors are relieved, with the situation not as bad as many had feared. Banking shares were up around the world which has helped to support worldwide stock markets in what is a very difficult period.

The problem is that on one hand the authorities need to be seen to be punishing banks because of their role in the credit crunch and worldwide recession, while on the other hand they need to be seen to be encouraging the introduction of new liquidity. The asset backing required by worldwide banking groups leaves less money available for services and consumers/businesses. Whether or not the Basel committee recommendations will actually be introduced in the future remains to be seen because there is significant resistance from the banking community.

Whatever happens over the next couple of years there is no doubt that the regulation of the UK and the worldwide financial arena will be tougher than ever before and while nobody can guarantee we will not experience the same credit crunch and economic down turn in the future, the authorities will certainly do their best to alleviate the risks.

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