The government’s crisis talks with Britain’s biggest banks have ground to a halt following a dispute regarding small business loans – just days before an agreement was expected.
Grouped together under the codename Project Merlin, the discussions are intended to create long-term harmony with the UK’s financial sector, and commit the country’s four biggest banks – HSBC, Barclays, Lloyds and RBS – to sustainable targets for lending and transparency.
The central aim of the talks is to set the banks a target for lending to small and medium-sized firms. It is believed that the Treasury wants the banks to commit to creating a £200bn fund for small business borrowing.
However, the banks appear unwilling to lend such an amount. It is claimed the banks are hoping to settle on a figure closer to £180bn, and at the moment there seems no way round the impasse.
The banking representatives are apparently concerned that, if they are coerced into lending to fragile small businesses, this may compromise their obligation to act in the best interests of shareholders at all times.
Furthermore, it seems many banking chiefs would prefer to wait and see the findings of the Independent Commission on Banking before they make firm commitments on future lending levels.
Those close to the deal had expected the two parties to announce an agreement by the end of this week; however that seems almost impossible now.
Shadow chancellor Ed Balls has criticised the government’s approach to the current dispute, claiming that “this is typical of a Conservative Party which has not been on the case with the banks since it took office and opposed tougher regulation throughout the last decade before the global financial hit".