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ECB moves to cut lending risk

By Paul J Davies, Ralph Atkins and Anousha Sakoui

Published: September 5 2008 00:01 | Last updated: September 5 2008 00:01

The radical action by the European Central Bank on its rules for providing liquidity to the banking sector caught virtually everyone by surprise on Thursday, judging by the huge volume of analyst comment and the rush to participate in conference calls.

Markets reacted badly as participants sold bank stocks or bought protection against debt defaults and then waded through the technical jargon to extract the real impact.

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