Banks advised to offer more business loans

Wed, 12 Jan 2011

The Treasury department is believed to be in discussions with the main high street banks in the UK in a bid to persuade them to distribute business loans of over GBP200 billion this year. The government is pushing the top five banks, RBS, Barclays, HSBC, Lloyds and Santander, to lend more to the British corporate sector than it did last year, when about GBP180 billion was borrowed by businesses .

If the loans go ahead, it may help to dampen down recent criticism of the level of expected bonus payouts for the executive board of the banks.

Analysts believe a deal between the Treasury and the banks, which are led in negotiations by the ex-CEO of Barclays, John Varley, will be finalised by the end of the month, although nothing is yet fully agreed.

The government is thought to be looking for verifiable lending commitments from the banks, and it is also expected that an independent authority will be responsible for ensuring the banks disburse the amount they promise to pay out. They are also hoping that the banks listen to public pressure, and award reasonable and transparent payouts on bonuses.

However, the coalition government have already said they will not discuss possible sanctions or penalties for banks that do not stick to their payout promises.
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