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By David Milliken
LONDON, July 24 (Reuters) - Britain's business minister,Vince Cable, has accused the Bank of England of holding backeconomic recovery by imposing excessive financial burdens onbanks and demanding they build up high levels of capital.
The central bank gained new powers in April to require banksand building societies to hold extra capital to make them lessreliant on public support in the case of collapse, somethingbanks oppose because it dilutes shareholders' short-termreturns.
The BoE surprised markets last month when, a few days beforeformer governor Mervyn King retired, it said two major lenders,Barclays and mutually owned Nationwide, fell short of a3 percent leverage target and needed to set out a plan to get tothat level.
The regulator did not give a deadline for this, leading someanalysts to assume the requirement would be enforced at the endof 2013, in line with other new regulatory demands on capital,though it has since said Nationwide will have until 2015.
Cable was reported on Wednesday as saying that lenders hadprotested to him that the uncertainty created by the BoE hadhurt lending - a view he shared in part.
"One of the anxieties in the business community is that theso-called 'capital Taliban' in the Bank of England are imposingrestrictions which at this delicate stage of recovery actuallymake it more difficult for companies to operate and expand," theFinancial Times quoted Cable as saying in an interview.
A Business Ministry spokeswoman confirmed to Reuters thatthe comments reflected Cable's belief that capital restrictionswere one factor behind weak lending to small businesses, andthat he would meet new BoE Governor Mark Carney in due course.
"Vince Cable's views on the lack of bank lending to smallbusiness are well known. Along with others in government, hewants to build a stronger economy that supports UK firms. He'skeen to work with the Bank of England to achieve this," thespokeswoman said.
The finance ministry and the Bank of England declined tocomment about the remarks.
However in setting a remit for the BoE's Financial PolicyCommittee, which makes overarching recommendations for bankstability, finance minister George Osborne said in April that itwas currently "particularly important" for the central bank totake account of short-term growth.
The BoE has said it instructed Barclays and Nationwide toraise capital in a way that does not affect lending.
Cable's comments come just weeks after outgoing BoE governorKing criticised banks for lobbying politicians and trying toundermine the new regulatory framework.
The new bank governor, Mark Carney, told a reporter in jeston Wednesday that British banks needed to act with a bit more"sense and sensibility", the title of a book by novelist JaneAusten whom Carney had announced will feature on the new 10pound note.
Carney was asked whether he felt "Pride or Prejudice" -another of Austen's works - about the performance of Britain'sbanking system.
"We're looking for a little bit more sense and sensibilitythank you," he told Channel 4 News, with a broad smile.
