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UK Banks Criticized for Purchasing Bonds Instead of Making More Loans

NEW YORK, NY--(Marketwire - Sep 27, 2012) - European banking stocks have rallied sharply in recent weeks as stimulus measures from central banks have helped ease concerns of an economic crisis within the region. The iShares MSCI Europe Financials Sector Index Fund (EUFN) has gained over 10 percent in the last month. The Paragon Report examines investing opportunities in the Banking Industry and provides equity research on Barclays PLC ( NYSE : BCS ) and Lloyds Banking Group PLC ( NYSE : LYG ).

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UK banks have recently come under criticism for not doing enough to help the economy as they have increased bond purchases instead of making more loans. Barclays, Lloyds, and Royal Bank of Scotland have all in recent weeks announced the repurchasing of bonds.

"Banks are showing their rude health and the strength of their liquidity positions," said Michael Symonds, a credit analyst at Daiwa Securities. "They could make loans to the real economy but here banks see real risks if they look at the uncertain economic outlook and the capital expense with granting a new loan."

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Barclay's CEO Antony Jenkins has recently stated that their investment bank and European operations will experience changes which will be unveiled in February. "We'll need to take some difficult decisions particularly for businesses that are on the borderline in terms of returns or reputational considerations," Jenkins said in a recent speech to investors.

Lloyds Banking Group is a financial services group providing a range of banking and financial services, primarily in the United Kingdom, to personal and corporate customers. The Group recently reported that it has become the first bank to access funding under the Government's Funding for Lending Scheme, with an initial draw down of £1 billion from the Bank of England.

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