Cable lays into Threadneedle Street 'Taliban'

Vince Cable has accused the Bank of England of 'Taliban'-like behaviour. What will new governor Carney make of it?

by Emma Haslett
Last Updated: 29 Aug 2013

Another corker from business secretary Vince Cable, who has dubbed a faction of the Bank of England the ‘capital Taliban’ because it has imposed ‘excessive’ burdens on banks by demanding they raise the amount of capital they hold.

In an interview with the Financial Times, Cable said capital regulations imposed on lenders by the Bank of England had ‘held back’ small business lending.

The argument goes that by forcing banks to hold more capital, the BoE is preventing them from being able to lend money - precisely what we don't need when the economy is floundering. Received wisdom may be that having a larger capital buffer will protect against future Lehman Brothers moments - but at a time when businesses need cash, it helps if banks have the money to lend.

The linguistic flourishes came thick and fast: not only does the Bank of England contain a ‘capital Taliban’, but one Treasury official has described the central Bank as having a ‘jihadist’ tendency against lenders - MT's reading of these rather oblique expressions is that the Bank is dogmatic and doesn't live in the real world.

Unless new governor Mark Carney does something, warned Cable, new regulations will create ‘the stability of the graveyard’. With metaphors like that, the Booker shortlist is missing an entry…

Still: Cable may have a point. Although figures by the British Bankers’ Association showed net borrowing by non-financial firms crept up to £172m in June (versus a net repayment of £2.7bn in May), it was the first rise in lending since January.

Given the government’s attempts at goading banks into lending through the Funding for Lending scheme, that isn’t really good enough. So any stimulus the Bank of England can provide could be helpful to the nation’s small businesses.

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