Chancellor George Osborne (pictured) has been forced to withdraw plans to improve pay transparency in the banking sector after deputy prime minister Nick Clegg and business secretary Vince Cable made it clear the Liberal Democrats would not accept the proposals.
According to the Financial Times, the “peace deal”, which was formulated with the help of former Barclays chief executive John Varley, was expected to be unveiled on Monday.
Under the agreement, banks would have to reduce bonus payments, disclose the pay details of their top executives and increase gross lending to businesses from £160bn to around £180bn.
If the banks agreed to the deal, the Government promised it would not impose new regulations and taxes on banks, creating a “level playing field” with other financial centres. However, it is thought the prospect of splitting up banks’ retail and investment businesses remains.
The LibDems are understood to think the measures would allow banks to get away with only modest concessions.