The Bank of England's 'black hole' number crunching

It seems extraordinary that the banks may have underestimated how much they will have to write off by as much as 50 billion pounds in the next few years.

That is not far off the amount of the bailout of RBS and Lloyds, even though they have been trying to sort themselves out for four years.

But the Bank of England has crunched its numbers and come up with a breakdown of what might go wrong.

They calculate that the banks might lose 30 billion more than they expect on bad loans on commercial property and to the euro-area, money they may never get back.

They say the banks might also have to pay out 10 billion more in compensation costs than they have budgeted for.

And they say they should budget for an extra 12 billion of capital to protect themselves from risk.

Put those three factors together and the Bank of England's fifty billion starts to make sense, even though the banks will privately quibble with the numbers.

The real crunch may come with the Bank's expectation that the high street banks can raise 25 billion by the end of the year to fill in the black hole without cutting back on lending.

Many bankers believe it is impossible to get more cash out of the door to businesses and build up their buffers at the same time - like having your foot on the accelerator and the brake all at once.

The Business Secretary this morning has already weighed in on this today, suggesting that asking the banks to put safety over lending when credit can be so hard to come by is counter productive.