Reports suggest that the Financial Policy Committee (FPC), which meets on Friday, will recommend that banks release some of the cash they are holding as a liquidity buffer.

The move would be the latest in a raft of measures from the BoE aimed at boosting lending and getting credit through to businesses and households.

Earlier this month the BoE announced that it would provide billions of pounds of cheap credit to banks via a new "funding for lending" scheme, to boost small business and mortgage lending.

It also announced the introduction of another initiative which was first outlined in December last year called the Extended Collateral Term Repo facility (ECTR), which aims to address a shortage of liquidity in the banking sector.

The ECTR will make it easier and cheaper for banks to borrow at least £5bn every month to cover any shortfalls in cash.

Deal Bureau director Gerry Hoare said that a relaxation of the current liquidity requirements was evidence that the government’s quantitative easing (QE) programme has had limited success in getting credit through to SMEs.

"Quantitative easing has helped a little bit but the reality is that banks are very nervous and they don’t want to lend because of the credit risk and what will happen if a business that they lend to does not perform as well as they thought it would," he said.

"I think a relaxation of the rules will help money get through to small businesses because banks won’t have to put so much capital aside to cover their lending."

Moorgate Capital partner Nicholas Moorgate suggested a more radical solution could be the answer to getting credit to businesses.

"Anything that is being done to encourage banks to lend is a good thing, but I think a quicker way to get money into the market would be to give it to an existing institution such as a branch of National Savings and Investments," he said.

"If the previous government had taken this kind of tack when QE started five years ago we could have had quite a reasonable institution running by now."

"One of the problems with QE is that the banks themselves don’t necessarily know what skeletons they have in their closet and which assets may turn out to be liabilities."