Vince Cable has criticised the Bank of England, labelling the institution a “capital Taliban” and arguing that it has held back the UK recovery by placing financial burdens on banks.
In an interview with the Financial Times, the business secretary said the Bank’s demand for lenders to build high capital buffers against future shocks has restrained lending to the country’s small businesses.
Cable told the newspaper: “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.
“It is clear that the main banks are failing to support good British companies in key areas like exporting and innovation.”
Last month, the Bank’s Prudential Regulation Authority told the UK banks to find another £13bn of capital in addition to the money already raised to strengthen their balance sheets.
Royal Bank of Scotland, Lloyds Banking Group, Barclays, Co-operative Bank and Nationwide Building Society were the major lenders deemed to have a shortfall in capital.
Nationwide chief executive Graham Beale then criticised the “crude” measure used by the PRA to assess banks’ financial strength and said it would act as constraint on low-risk lending.
“The leverage ratio is an unsophisticated measure which ignores the quality of an organisation’s assets or its business model,” he told the FT.