Vince Cable: disingenuous bankers are trying to derail reforms

Vince Cable: 'Banks are in a way trying to create a panic around something which they know has got to happen.' Photograph: Steve Parsons/PA

Vince Cable has accused bankers of using the economic turmoil in Europe to try to derail reform of the financial sector.

The business secretary said that "louder and louder voices" were being raised among some of the big British banks giving warning that regulatory change in Britain would put the recovery at risk.

The Independent Commission on Banking is expected to recommend separating banks' retail operations from their investment arms when it reports on 12 September.

There have been attacks on the proposals from the director general of the CBI, John Cridland, and British Bankers' Association's chief executive, Angela Knight.

Cridland has said taking action to reform the banks now would be "barking mad", while Knight warned imposing the measures on lenders risked denting confidence and cutting the supply of credit.

However, Cable said in an interview with the Times that the fact that there were still fears about the collapse of big financial institutions was "all the more reason for grappling with this issue".

"It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen," he said.

Cable has long favoured the separation of retail and investment banking. He added: "The governor of the Bank of England and many other people have been arguing that we have to deal with the 'too big to fail' problem. We can't have big global banks with balance sheets bigger than British GDP underwritten by the taxpayer; this can't go on and it has got to be dealt with."

The business secretary also said that he did not expect another 2008-style meltdown in the banking sector, but acknowledged that difficulties could still lie ahead for the British economy.

"To my mind, the greater worry is not a massive financial crisis again but it is a general slowing down of western economies, with all the problems that presents for employment and long-term dynamism," said Cable.

In comments reported in the Financial Times, Cridland had said: "Taking action at this moment – this moment of growth peril, which weakens the ability of banks in Britain to provide the finance that businesses need to grow – is just to me barking mad."

He added that a perceived political need for action after banks were bailed out in 2008 was driving the scale and pace of reform, and warned that "there's an own goal here about to be scored if we get this wrong".