Reuters/London
Business Minister Vince Cable has accused the Bank of England (BoE) of holding back economic recovery by imposing excessive financial burdens on banks and demanding they build up high levels of capital.
The central bank gained new powers in April to require banks and building societies to hold extra capital to make them less reliant on public support in the case of collapse, something banks oppose because it dilutes shareholders’ short-term returns.
The BoE surprised markets last month when, a few days before former governor Mervyn King retired, it said two major lenders, Barclays and Nationwide, fell short of a 3% leverage target and needed to set out a plan to get to that level.
The regulator did not give a deadline for this, leading some analysts to assume the requirement would be enforced at the end of 2013, in line with other new regulatory demands on capital, though it has since said Nationwide will have until 2015.
Cable was reported yesterday as saying that lenders had protested to him that the uncertainty created by the BoE had hurt lending - a view he shared in part.
“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 Financial Times quoted Cable as saying in an interview. A business ministry spokeswoman confirmed that the comments reflected Cable’s belief that capital restrictions were one factor behind weak lending to small businesses, and that he would meet new BoE Governor Mark Carney in due course. “Vince Cable’s views on the lack of bank lending to small business are well known. Along with others in government, he wants to build a stronger economy that supports UK firms. He’s keen to work with the Bank of England to achieve this,” the spokeswoman said.