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Controversial think tank suggests 2011 banking bailout

A controversial think tank, the independent New Economic Foundation, has today hit the headlines with a suggestion that the UK banking arena will require a second bailout during 2011. The think tank believes that a bailout to the tune of £25 billion a month may be required by the sector in 2011 although George Osborne, the Chancellor of the Exchequer, has dismissed such claims as speculation and unfounded.

The think tank has reviewed various statistics announced by the UK government, the Bank of England and the UK banking arena and suggest that repayment of £185 billion fund borrowed from the Bank of England hundred special liquidity scheme could cause problems for some banks in 2012. These funds were issued against £287 billion of "illiquid assets" and when you consider the ongoing increase in financial backing required under the Basel lll agreement there is the potential for something of a credit squeeze in the medium term.

This is the last thing which the UK government and the Bank of England would have hoped for amid signs that the UK economy is already starting to turn downwards. Confidence in the UK is evaporating at an alarming rate and such controversial report as that issued by the think tank today will not help the situation.

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