Deputy Lib Dem leader Simon Hughes says he has "seen and heard" banks making racist decisions on lending.
He said banks will "say yes to a well established white individual" but say no to a black business person "with a better financial reputation".
The London MP also said he had seen requests for finance turned down with no reason given to the applicants.
He was speaking at his party's annual conference, backing a motion calling for banks to be more transparent.
"I have seen clearly banks, and heard clearly banks, who make racist decisions," said the MP for Bermondsey and Old Southwark.
"They will say yes to a well established white individual who's been in the community, but somebody with a better financial reputation who comes to them from the minority communities or is a black business person gets turned down."
Mr Hughes said that in recent years banks had failed the country, "tarnished the reputation of Britain" and failed to help local economies grow.
He said new rules were needed to force banks to publish details of requests for funding and the reasons behind the decisions they take.
This would help make them accountable to their community as well as accountable nationally.
This was one of the measures needed to return British banking to the "respectable profession" his careers teacher had told him about during his school days, he added.