Business Secretary Vince Cable has warned the UK’s biggest banks they could face less lenient taxation policies if they fail to meet the lending targets set out in the Merlin agreement.
In February, Barclays HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander agreed to lend £190bn to businesses in 2011, with £76bn of that going to SMEs.
However, in May it emerged the banks had missed the £19bn quarterly lending target to small and medium businesses by £2.2bn.
Cable told MPs on the Business, Innovation and Skills Committee the Government will “examine options for further action” if the targets are not met at the end of the year.
Cable said: “I think if it is clear at the end of the year that the banks have not significantly changed their practises, have not made a significant effort to achieve the targets that they agreed with us, it will then be a question of the Government saying sorry, this agreement has not worked, and we are absolved from any commitment on our part, in terms of restraint and respect of taxation.”
Cable said businesses are put off making applications because they do not get appropriate support from banks and said banks are engaging in a practice “discouraged demand” when it comes to SME lending.