The Business Secretary Vince Cable has attacked the Bank of England's plans for Britain's banks to raise up to £25bn to strengthen their balance sheets.
In an interview with Sky News, he said: "The idea that banks should be forced to raise new capital during a period of recession is an erroneous one.
He warned that the ruling by the Financial Policy Committee will "prolong the time it takes for the British economy to recover by further depressing already-weak SME lending".
"I believe the weight of the argument is in favour of counter-, not pro-cyclical, lending measures, and I rather suspect that the new Governor of the Bank of England shares this view, he added.
The Bank of England has crunched its numbers and worked out the banking sector needs to fill a £25m 'black hole' in its reserve funds.
The Bank of England's new regulator has just revealed how much danger our banks are still in, and it is not pretty.
The UK's big banks mess is very well documented. The FPC report will help show just how far they are from getting a clean bill of health.