Project Merlin bank agreement set to be revealed

Chancellor George Osborne is set to announce details of Project Merlin, the government's agreement with the banks.

It is expected banks will agree to lend about £190bn to businesses this year and to reveal more about the salaries of top earners.

But it is not clear how lending will be monitored or if the agreement will actually be binding.

Bank bosses were reportedly "livid" after the government increased a levy on banks on Tuesday.
Bonuses

Details of the long-awaited agreement, expected to be announced after Prime Minister's Question Time, are also expected to include support for the government's so-called Big Society Bank.

Before the official announcement, David Cameron told the Commons that his government would be taking £200m from the banks that would go into the voluntary sector.

Banks have also been asked to show restraint in bonus payments - though these are expected to total £6bn this year.

HSBC, Barclays, Royal Bank of Scotland (RBS) and Lloyds Banking Group are set to agree to Project Merlin, along with Santander.

BBC political editor Nick Robinson said the government was determined to complete Project Merlin before banks start publishing their end-of-year results and bonus pools next week.

Banks loaned about £175bn to businesses last year and the government wants a commitment that this will increase.

However representatives of small companies have expressed concern that the pledge by the banks will be "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 chancellor said this week that he was taking a further £800m this year in his bank levy, a move he said "cleared the way" for Project Merlin to be agreed.

BBC business editor Robert Peston said executives had not been irked by the sum being demanded, but rather that it appeared to be a case of "bashing the banks" in the face of public pressure.

Do you own a small business? Are you struggling to secure credit? Has your business been refused a bank loan?