City reforms could send Britain into double-dip recession, warns secret report (by the banks)

Britain's banks will warn that tough new rules to purge the financial system of its excesses could trigger a double-dip recession.

In a 'deeply offensive' display of arrogance, the banks are expected to plead for leniency as Britain's three main political parties prepare to introduce a raft of safeguards to prevent another financial meltdown.

The tough new regulatory regime could force lenders to ration loans, throttling the embryonic recovery in the economy, the banks will warn in a report next month.

News of the study prompted accusations that the banking sector - propped by £1trillion in taxpayer cash - is 'scaremongering' to avoid the new international standards.

A report commissioned by the banks has reveled Britain could be heading for a double-dip recession if sweeping City reforms are put in place

It came on the day that the Barclays unveiled a £1.4bn windfall for staff at its 'casino' arm for the first three months of the year following a 47 per cent surge in profits.

Thanks to the mammoth state support, most British banks have seen their earnings bounce back to boom-era levels, triggering meaty bonuses for City fat cats.

But governments around the world are planning to introduce new levies on financial institutions to curb risk-taking and replenish public coffers, which the banks fear will hit profits.

In a dossier due to be handed to the new government in June, Britain's banks will warn that the new taxes will reduce the flow of credit to businesses and consumers, potentially pitching Britain back into recession.

Vince Cable, Treasury spokesman for the Liberal Democrats, said: 'Given the scale of the bailout the financial sector has received from the taxpayer, this kind of scaremongering from the City is simply whingeing.'

By Simon Duke