The UK Parliament’s Treasury Select Committee is to examine further whether banks are required to hold sufficient capital to cushion them against potential losses, wading into a row between the Bank of England and the architect of the sector’s reforms.

Earlier this year John Vickers, chairman of the Independent Commission on Banking (ICB), said the BoE was not making banks hold as much equity capital as the ICB recommended in its proposals for reforming the sector five years ago.

The accusation touched a raw nerve at the BoE, prompting a string of speeches from top officials who said banks were already within a hair’s breadth of holding enough capital and BoE deputy governor Andrew Bailey, who heads banking supervision, taking a swipe at what he called the “big equity school”.

Robust levels of capital are as important now as they were a decade ago

Yesterday, the UK Parliament’s Treasury Select Committee said after receiving a detailed response from BoE Governor Mark Carney to Vicker’s criticisms that it would now initiate further work on ensuring banks hold adequate levels of capitalto remain resilient in an economic downturn.

“Robust levels of capital are as important now as they were a decade ago. These complex issues remain a source of controversy,” the committee’s chairman, Andrew Tyrie, said ina statement.

In his 13-page letter sent to Tyrie earlier this month and published yesterday, Carney said UK banks were required to hold more capital than was recommended by the ICB, and must also comply with other requirements not envisaged by the ICB.

“If capital requirements are increased, some of those costs will be passed on to households and businesses in the real economy,” Carney wrote.

The BoE’s Financial Policy Committee has a remit not to act in a way that damages the capacity of the financial sector to help the economy grow over time, Mr Carney added.

A key aim of the Vickers reform was not just to increase capital but also to make it easier to close down failing parts of a bank while keeping customer deposits safe.

“It would be inconsistent to discount these benefits when setting the overall capital framework,” Mr Carney said.