A long-awaited agreement with the largest UK banks on lending and bonuses has been announced by the government.

Under Project Merlin, banks will lend about £190bn to businesses this year - including £76bn to small firms - and reveal some salary details of top earners.

The Bank of England will monitor whether loans targets are being met.

However, Chancellor George Osborne formally ruled out imposing a bonus tax, despite pressure from Labour.

On Tuesday, the government increased a levy on banks to £2.5bn this year - raising an extra £800m.

Shadow chancellor Ed Balls accused the chancellor of "putting politics ahead of economics".

"For the chancellor who talked so tough in opposition... this is a pitiful outcome and an embarassing climbdown," he added.

HSBC, Barclays, Royal Bank of Scotland (RBS) and Lloyds Banking Group have signed up to the Project Merlin agreement, while Santander has agreed to the lending parts of the deal.

Other pledges include providing £200m of capital for David Cameron's Big Society Bank, which is supposed to finance community projects.

However, while banks have also been asked to show restraint in bonus payments, these are expected to total more than £6bn this year.

On matters of remuneration:

RBS, HSBC, Lloyds and Barclays have agreed to publish the pay of their five highest paid executives, who are below board level - though this will not include top-earning traders who do not have managerial responsibility

The chairmen of banks' remuneration committees will tell the City watchdog, the Financial Services Authority, that they are cutting the amount provided for bonuses in 2010, after negotiations with ministers

Lloyds and RBS repeated their 2010 commitment that the cash element of any bonus will not be more than £2,000

The government will legislate that from 2012 all big UK banks must publish the pay of their board members plus the eight highest paid executives below board level. This disclosure requirement will apply to the UK operations of overseas banks such as Goldman Sachs and UBS.
BBC business editor Robert Peston said that "on paper at least, the UK will have the most transparent regime for bankers' remuneration in the world".

'Business concerns'
Banks loaned £179bn to businesses last year and the government wanted a commitment that this would increase.


They are also going to be providing £1bn of risk capital over three years for small businesses in parts of the UK worst hit by spending cuts.

The government said that the measure of whether banks are providing the promised credit to business would be among the performance targets used to determine bonuses of bank chief executives.

However, the provision of credit to UK businesses will be on commercial terms.

And representatives of small companies have expressed concern that this means the lending pledge by the banks is "academic".

"The vast majority of businesses are not going to the banks and seeking finance at the moment," said Andrew Cave from the Federation of Small Businesses.

"And those that do are telling us that the cost of borrowing - both existing and new borrowing - is increasing and those issues are not going to go away with today's announcement."

The British Chambers of Commerce (BCC) said that small business lending was a separate and "far more important and long-standing challenge" than the debate over bonuses.

The BCC's director general, David Frost, said that firms had seen their relationships with lenders strained and that "poor or opaque decision-making, over-centralised processes and a lack of good relationship managers on the ground" had caused a crisis of confidence between business and the banks.

"While the big banks' renewed commitment to small business lending is welcome, ministers and the banks need to focus their energy on improving frontline services for small and medium-sized firms," he added.

"Without clear lending processes and more sensible decision-making at a local level, many businesses will still be reluctant to ask for loans and big net lending targets won't be met."

http://www.bbc.co.uk/news/business-12402469

Apart from massive tax avoidance, I wonder what the financial sector got out of the government for this 'humiliation'...

And what will they do if not? Ask them nicely to do so in future?

The BBC has to disclose such information why not the banks and every company and organisation. Maybe start with the very high earners and go down as far as the those that hit the top tax band.

Not really comparable. If you want to watch TV in this country you have to, by law, pay for a TV License. If you need a bank account, you've got a considerably wider range of options to chose from.

Yes but they have all had public money. Banks may be privately run but since they are way too important they should have the top salaries disclosed. Then why not every other company? Some have government contracts and they should disclose. Then why not make it simple and include every organisation. It might stop some of the pay spirals if everyone cans see what they got at their former employer.

Actually, that's far from accurate. A couple of the high street banks didn't and that's without even considering the private banks like Coutts, most of whome survived the credit crunch fine because they were operating with much higher levels of equity. The banking & Investment sectors as a whole need to be regulated, whether any particular member was bailed out by UKGov or not is irrelevant.

Jon

Didn't they already promise to lend more for mortgages and businesses? That failed to materialise, but we believe them this time, right?

Quite so - that was the whole point of 'Quantitative Easing' i.e. giving the banks an ocean-liner sized bag o'cash so they could then lend it to people who could do stuff with it and thus give the whole economy a bit of a boost. They proceeded to instead give it straight to their shareholders and a percentage of their staff as humungous bonuses for making lots of money that year, mostly apparently due to their sterling work waiting around for the government to give them an ocean liner sized bag o'cash.

Hard work banking y'know. Absolutely needs the best minds to be able to do it properly.

Jon

I think that even if they had not taken money directly, they would have been seriously bailed out by the fact their insolvent counter parties were bailed out. They were also given easy access to Bank of England money at zero rates even if they did not need it. Interest free money is great. Coutts may not have taken a penny but as part of RBS it would have been bailed out. Goldman Sachs was bailed out by the bailout of AIG as was Barclays, and Deutsche bank. So Barclays were bailed out by the US. When the US government imposed a bailout on the banks they deliberately did it in such a way that the weakest banks were not identified. This indirectly bailed out counter-party banks. The same happened here when Northern Rock and RBS were nationalised. LloydsTSB also had huge bailouts which would have benefited any bank that did not need a bail out. Most of the bailouts were hidden and we will never know who borrowed what and how much. The hundred year rule will not apply in these cases. The hundreds of billions that the Bank of England lent out will forever be a secret. So it cannot be said that no bank did not get bailed out

As for increased mortgage lending the lending rules have increased to the extent that the banks will not take risks on new loans for anyone that is even marginally a risk. As the housing market is still significantly overvalued why lend when you will have to take huge losses? Same applies to small businesses.