The Government will intervene if banks pay out large bonuses and do not increase lending, according to the Deputy Prime Minister.
In an interview with the Financial Times, Nick Clegg says banks must appreciate what is happening in the wider economy.
He says: “The banks should not be under any illusion, this Government will not stand idly by. It is wholly untenable to have millions of people making sacrifices in their living standards only to see the banks getting away scot-free.”
Clegg says he wanted to end the tension between banks and Government but banks needed to show restraint and reduce the amount they pay in bonuses in February and March.
He says: “We can’t do that unless we have a cathartic settlement where we see visible restraint from the banks and sensitivity to the context in which they operate.”
He said the threat of a new bonus tax should be held in reserve.
He called on the banks to make quantifiable promises on bank lending to small companies and to make additional upfront funding for start-up companies available.
The article quotes an anonymous banker saying Clegg’s comments could be seen as a “cynical PR exercise”.