Vince Cable accuses Bank of England officials of 'acting like the Taliban'

Business Secretary argued Bank demands are deterring small business lending and preventing recovery

Vince Cable has stirred tensions within the Bank of England by apparently comparing policymakers to the Taliban over restrictions imposed upon banks.

He accused the BoE of slowing recovery by imposing heavy financial burdens on banks.

The Business Secretary argued its demands that banks must boost the levels of capital they hold to protect against future financial shocks is deterring small business lending and holding back financial recovery.

In an interview with the Financial Times, Mr Cable said: "One of the anxieties in the business community is that the so-called 'capital Taliban' in the BoE are imposing restrictions which at this delicate stage of recovery actually make it more difficult for companies to operate and expand."

Mr Cable has hinted at tensions between the BoE and the Government before, but the strong language of his latest intervention comes less than a month into the tenure of new Bank governor Mark Carney.

It remains to be seen whether his remarks will persuade policymakers to soften their stance or simply harden their resolve.

Chancellor George Osborne reportedly shared Mr Cable's views. One Treasury official told the FT that it was hoped that Mr Carney would rein in the "jihadist" tendency in Threadneedle Street against the banks.

The Bank's new Prudential Regulation Authority (PRA) has ordered Britain's five biggest lenders to raise £13.4 billion to plug a £27.1 billion gap in their finances.

Nationwide, Britain's biggest building society, was reportedly left with a £1 billion hole.

It announced two weeks ago that it had been able to meet the PRA's demand for it to strengthen its leverage ratio - a key measure of financial strength - to 3 per cent from 2 per cent, without raising extra funds from investors.

The regulator's critics say that by trying to meet the new targets, banks and building societies will have to slow new lending to households and small businesses that is desperately needed to boost the UK's ailing economy.

While official figures tomorrow are expected to show that growth improved to around 0.6 per cent for the second quarter, many economists believe the recovery remains fragile, and gross domestic product is well below its pre-recession peak.

Anthony Browne, Chief Executive of the British Bankers' Association told BBC Radio 4's Today programme that he thought Mr Cable was quoting others, rather than using the word himself.

”But there clearly is concern in various parts of the industry about the pace at which they're required to raise their capital ratios.

“The Bank of England financial policy committee has these counter-cyclical policy requirements, where the amount of capital they require banks to have they know is counter-cyclical economically. You push capital requirements up in a boom, you push them down when there's a recession.

”The trouble at the moment - and indeed for the last five years - is that we've had this massive increase in capital amongst banks of £165 billion during a time of low economic growth. Across the banking sector as a whole, there clearly is a correlation in the short term between requiring banks to massively upgrade the amount of capital they have and the amount of lending and the amount of economic growth.“

Additional reporting by PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement