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UK banks to warn George Osborne of problems ahead

The British Bankers Association (BBA) will this week hold a meeting with George Osborne to discuss a potential £1 trillion black hole in banking finances. The £1 trillion figure is made up of a £400 billion liquidity program which was closed by the Bank of England and EU regulations which could see an additional £600 billion held in reserve by the banking industry to meet new capital adequacy requirements. So how will this impact upon the UK banking arena and the UK economy?

The withdrawal of the liquidity program will impact upon both the level of funding available in the money markets and the cost of this finance. The £600 billion additional capital requirement, which is a forecast from the BBA in relation to new EU regulations, will effectively take £600 billion out of the banking industry and see many banks forced to curtail the services which they provide. Either way, the more money which is taken out of the UK banking system the less money available for consumers and businesses which will ultimately impact upon the economic recovery in the UK.

While these figures are open to debate there is no doubt that as a consequence of the credit crunch and the resulting recession, which many blame on the banking industry, there will be an increased regulatory cost to the financial arena.

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