Treasury discussing business loans with banks



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Britain’s biggest banks are believed to be in discussions with the treasury about disbursing business loans in excess of £200 billion for the year 2011. Observers believe that the move will help in reducing tensions that have been building up over proposed bonus payouts.

The government expects the banks to exceed their 2010 lending figures in 2011. Initial numbers suggest that total lending in 2010 could be around £180 billion and insiders hope that figure to be at least 10 percent higher in 2011.

Sources close to the developments suggest that a deal is likely this month, although in the words of an official “We’re hopeful but it’s not in the bag yet”.

Britain’s five biggest banks are trying to strike a deal with the government under the leadership of John Varley – Ex Chief Executive of Barclays which may see banks submitting their proposals in sealed envelopes to keep their commercial plans sensitive.

Later an independent authority like the Bank of England may keep an eye on Barclays, RBS, HSBC, Santander and Lloyds to ensure that the promised lending amount is being disbursed.

To stimulate the economic recovery, the government wants verifiable lending commitments. Chancellor George Osborne wants additional transparency in bonus payouts as well as restraint on the amount paid.

Many liberal and Labour MPs are skeptical about the success of such lending targets since banks have flouted norms in the past regarding targets in the absence of any sanction. The Treasury has declined to discuss penalties for banks if they fail to adhere to their targets this time around.

“It would be total nonsense unless there were sanctions for failure”, said Lib Dem Treasury Spokesman Lord Oakeshott. However, the Chancellor is understood to be keen on ending the face off with the banks.

Nonetheless, sparks will fly today when Barclay’s new Chief Executive Bob Diamond is grilled by the Commons Treasury Committee.

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