The Bank of England (BoE) needs to do more to “unblock the logjam in the wholesale financial markets,” according to the head of the Confederation of British Industry (CBI).

In a speech to the CBI Scotland’s annual lunch, chairman Richard Lambert said the financial authorities could be doing more to ease the credit crisis.

“Ideally, the Bank of England needs to be lending money to the banking system on longer terms and against a wider range of securities (or collateral) than it is normally willing to do,” Mr Lambert said.

The BoE is said to be working on a plan to allow banks to swap mortgage-backed assets for government bonds in an attempt to thaw out the frozen wholesale money markets.

In addition, Mr Lambert said banks should also play a part in restoring liquidity.

“This week came news that JP Morgan Chase, one of the strongest banks in the world, is raising new equity.

“Today comes speculation that the Royal Bank of Scotland is planning to do the same. It is right that these major banks should be taking a lead in raising new equity and rebuilding confidence,” he said.

But he also reminded the government not to use business as a scapegoat and increase taxes to paper over some of the immediate political difficulties.

Mr Lambert stressed that a slowdown “would not be the end of the world” and the economy is heading for a soft landing, sounding more optimistic than in his speech earlier in the week when he said “the global credit crunch has slammed the brakes on economic growth in the UK”.