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.“
- 3 The enemy within: People who hear voices in their heads are being encouraged to talk back
- 4 Phil Neville backtracks on Tomas Rosicky 'I'd smash him' comments from Match of the Day 2
- 5 British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Paris attacks: Do not call Charlie Hebdo killers 'terrorists', BBC says
UK weather: Snow to fall in the coming week with sub-zero temperatures to last until early February
Asteroid narrowly scrapes past Earth: how to watch the closest space rock for decades as it flies by
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Prince Philip set to be knighted by Australia: Celebrate by reading his greatest gaffes
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...