Vince Cable accuses Bank of England of holding back economy

Wednesday 24 July 2013 09.20
Vince Cable said the 'capital Taliban' in the Bank of England were imposing onerous restrictions
Vince Cable said the 'capital Taliban' in the Bank of England were imposing onerous restrictions

Britain’s business secretary Vince Cable has accused the Bank of England of holding back the economic recovery, the Financial Times has reported.

The minister has claimed that the country's central bank was imposing excessive financial burdens on banks by demanding that they build up high levels of capital.

Paul Tucker, the deputy governor for financial stability at the Bank of England, has pushed British lawmakers to introduce a new rule that would require banks to meet a limit on lending as a proportion of their capital and curb banks' risk exposure.

However, some have complained that demands they build up capital levels run counter to calls from the government and the Bank of England that they lend more in order to boost the country's slow economic recovery.

"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," the FT quoted Mr Cable as saying in an interview.

"It is clear that the main banks are failing to support good British companies in key areas like exporting and innovation," Mr Cable told the FT, expressing his concerns about small business lending.

Britain's Prudential Regulation Authority said on 20 June that it would set a leverage ratio of 3% for British banks, as required under Basel III international capital rules, by January 2018.

Big banks such as Barclays Plc and Nationwide bank fall short of the minimum limit, the PRA said last month.

Chief executive of the British Bankers' Association Anthony Browne told BBC Radio 4's Today programme: "I think Vince Cable is quoting other people, rather than trying to use 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."