Plans to boost credit to small businesses have been dealt a blow after Nationwide delayed its launch into the sector until 2016 as the lender is being forced to hold more capital as a buffer against financial crises, the Financial Times reported.

The mutual, which had planned to begin lending to small businesses this year, faces demands to bolster its leverage ratio - which measures its capital as a percentage of its assets - to 3 per cent by the end of 2015.

Nationwide's delay will be a blow to Government plans to unblock the credit logjam to small firms, seen as vital to speeding up economic recovery.

The lender revealed plans to enter the SME loans market last year, where lending has shrunk as banks retreat and demand wanes. At the time chief executive Graham Beale described it as a "natural extension of what we can do".

But the Prudential Regulation Authority (PRA) recently demanded Nationwide draw up plans to plug a hole in its balance sheet by bolstering its leverage ratio.

Mr Beale criticised the measure as a "crude instrument which will be a constraint for low-risk lenders (and) too lenient for high-risk lenders".

Weeks later the building society was given vital breathing space by the regulator on meeting the tougher standard, when the PRA approved its capital-raising plans and gave it until the end of 2015 to increase its leverage ratio from 2pc.

At the time Nationwide did not say how it will bolster its capital levels, but its plans do not involve raising extra funds from investors.

Nationwide is reportedly focusing on increasing its market share of current accounts instead.

The FT said the building society is now unlikely to launch a full SME service before 2016.

Business Secretary Vince Cable last month stoked tension with the Bank of England. He said its demands that banks must hold more capital to protect against future financial shocks is deterring small business lending and holding back recovery.

Mr Cable said: "One of the anxieties in the business community is that the so-called 'capital Taliban' in the Bank of England are imposing restrictions which at this delicate stage of recovery actually make it more difficult for companies to operate and expand."