24/07/2013 04:35 BST | Updated 22/09/2013 06:12 BST

Vince Cable Attacks Bank Of England 'Taliban'

Business Secretary Vince Cable during a visit to the headquarters of outdoor clothing manufacturer Trespass after the launch of the fourth Scotland Analysis paper Scotland Analysis: Business and the microeconomic framework.

Vince Cable has stoked up tension with the Bank of England by comparing policymakers to the Taliban over restrictions imposed on banks.

The Business Secretary believes that 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 recovery.

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

Mr Cable has expressed similar views 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 was reported to share 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.

Tory MP Brooks Newmark, a member of the Treasury committee, attacked the business secretary for practising "cheap politics" by using the term "Taliban".

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.

Two weeks ago it announced 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% from 2%, without raising extra funds from investors.

Critics of the regulator say that in striving 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% for the second quarter, many economists believe the recovery remains fragile, and gross domestic product is well below its pre-recession peak.

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