Ministers threaten banks over lending targets

| January 24, 2011 | 0 Comments

A report by the BBC has established that bank’s lending targets have not been met and pressure is now mounting for bank bosses to reduce bonuses and increase lending to businesses and homeowners.

After talks, the Treasury has made it clear that the Government will threaten to break up big banks unless they agree to meet targets.

The credit crunch saw the tightening of lending criteria and many are struggling to secure a mortgage, unless they have a hefty deposit, while cash-strapped businesses are struggling to obtain credit.

Talks with the Treasury over Chancellor George Osborne’s demands to increase lending from £180 billion last year to more than £200 billion in 2011, as well as reducing bankers’ bonuses, have collapsed.

Figures show that Britain £1 trillion in the red and the Treasury believes that the sheer size of the debt should force banks to justify their reluctance to slash bonuses and boost lending, according to the report.

Bonuses have been a major issue for some time now and have sparked public outrage since many argued that excessive bankers’ bonuses reward the risk-taking culture that led to the financial crisis.

The Chancellor has already attempted to strike a deal with banks, which will see the bonus pot shrink and further taxes imposed on banks.

Various meetings between the Government and banks have been taking place over recent weeks about bonus payouts and lending targets.

The latest multi-million bonus payments for bailed out banks, the Royal Bank of Scotland and Lloyds Banking Group, are likely to enrage taxpayers even further.

In the meantime, returning to the possibility of splitting up the big banks, Independent Commission on Banking (ICB) chairman Sir John Vickers said this is still being looked at.

The ICB has been looking at ways to increase competition and choice among high street banks and one option could see existing banking giants broken up and new names enter the industry.

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