The UK's biggest banks have agreed to lend £190 billion to businesses in 2011 after finalising the details of the long awaited Project Merlin with the Government.
Barclays, HSBC, Lloyds Banking Group and RBS have committed to all aspects of the project, including pledges relating to the size of bonuses and pay disclosure, while Santander has signed up with respect to lending.
Around £76 billion of the overall amount has been promised to small and medium sized enterprises, up 15% from the actual amount lent to small firms in 2010.
How successful the banks are in meeting the lending targets will be part of the criteria used to measure the performance of the banks' chief executives.
Another commitment under the agreement will see the salaries of the five highest paid senior executive officers at Barclays, HSBC, Lloyds Banking Group and RBS being published annually, alongside the salaries of the executive directors which are already revealed in annual accounts.
The Government said it might introduce similar disclosure requirements for all large banks from 2012 onwards, and make the pay of the eight highest paid executives below board level public knowledge.
It has also been revealed that the 2010 bonus payments for each of the four banks will be lower than in 2009.
For all staff at RBS and Lloyds, upfront cash bonuses will be limited to a maximum of £2,000 this year.
Despite the lending promises, John Walker, national chairman of the Federation of Small Businesses, said neither the Government nor the banks should be let off the hook, and that he hoped Project Merlin was 'a preamble to what we hope will be bigger announcements from the Independent Banking Commission'.
"While we welcome the intention to lend more to small businesses, we still need to see a major restructure of the sector.
"Many small firms aren't going to the banks to access finance and credit and the main problem they face is the cost of credit. Many small businesses have lost faith in the sector and are looking at other means of finance - and it is the smallest of firms that need finance most.
"To achieve robust economic recovery, the smallest firms and start-ups need to have access to finance, but today's commitments - as with previous lending targets - are unenforceable."
Earlier in the week, the Chancellor decided to increase the levy imposed on banks in a move which should raise an additional £800 million for Government coffers.
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