Vince Cable
Former business secretary Vince Cable has been pressing for stronger banking regulations for yearsGetty

The Chancellor and the Governor of the Bank of England are "lacking motivation" to crack down on banking fraud, according to Sir Vince Cable. The former business secretary accused George Osborne and Mark Carney of bowing to lobbying pressure from the banking sector and turning "a blind eye" to "abuses in the system".

He was talking to Dermot Murnaghan on Sky News in response to the news that the Financial Conduct Authority (FCA) has decided not to press ahead with a review of bad banking practices. Vince insisted that the "balance" had gone and that the government was now only listening to the bankers.

When he was in government, Vince argued for stronger regulations on financial institutions, including higher capital requirements, and separating the banks' investment and retail arms. He suggested that the Chancellor would be to blame if bad practices were to return to the banking sector.

He said: "This is the dangerous time because it's when there isn't an immediate threat to the system that the pressure goes off, bad practices creep back in, there's excessive risk-taking and abuse in the investment banking side, banks no longer feel under any pressure from politicians to support productive lending through small business."

The FCA quietly announced its decision to drop its investigation at the end of last year, prompting shadow chancellor John McDonnell to criticise George Osborne.

McDonnell said: "This will be a huge blow to customers and taxpayers who are all still paying the price for the failed culture in the banking sector that's been widely attributed to be among the main causes of the crash and the scandals over Libor and price fixing.

"But what is also worrying is that they are ditching this review and replacing it with a potentially watered down version despite the obvious fact that we haven't got to the bottom of cultural mispractice and when as far as we know there is still a problem.

"The Chancellor, therefore, cannot stay silent on this issue. It's time he used his influence to keep this review going."

Osborne is due to name a new chief executive of the FCA soon, after its former boss was ousted in the summer.