The government is likely to be forced to pump billions more pounds into UK banks, the Bank of England indicated yesterday.

Even though it is only two months since the government ordered a groundbreaking £37bn bank recapitalisation package, Charlie Bean, the central bank’s deputy governor, told the Financial Times that as the economy kept slowing and banks found it harder to lend, “it may well turn out that further capital injections are required”.

Bean said he had been struck by the number of businesses he had spoken to that were retrenching on staff even if they were not being directly affected by the downturn.

This had made him focus on “the really central question [which] is to what extent banks around the world cut back on their lending to households and particularly businesses”.

Financial Times