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Why has the UK banking sector been hit so hard?

The very downbeat and depressing assessment of the UK banking sector by credit rating agency Standard & Poor's has cast a very dark cloud over the UK economy. More and more people are wondering exactly how the UK economy appears to have been hit harder than any other around the globe with the UK banking sector still under enormous pressure.

It is difficult to understand exactly why the UK banking sector appears to have been amongst the hardest hit in the world but the fact that the UK government had to step in with billions upon billions of pounds of bailout funding is obviously a factor. However, when you consider that the US authorities also bailed out their banking system to the tune of billions upon billions of dollars and it still remain in the top tier of the worldwide banking league, where did the UK go so wrong?

It may well be that the downbeat assessment of the UK banking sector is a reflection of the increased risks we have seen taken on over the last few years. It may also be a reflection of the ever-growing UK budget deficit which is this year expected to hit £178 billion. It is also worth remembering that banking company balance sheets are still under pressure and changes in the regulatory environment will mean more funding will be required to reach the new capital ratios dictated by the authorities.

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