Business

Bank bosses furious about additional levy

BBC business editor Robert Peston on Project Merlin

The chairmen and chief executives of the UK's big four banking groups are livid that an additional £800m levy has been imposed on their banks (see my earlier post).

According to sources, the chief executives of HSBC, Barclays, Royal Bank of Scotland and Lloyds will have a conference call this afternoon, to decide whether to press ahead with Project Merlin, the lending and bonuses deal under discussion with ministers, or whether to "throw their toys out of the pram" (in the words of a banker).

"We have been negotiating with the Treasury in good faith, on the assumption that the Chancellor would not spring nasty surprises like this on us," said a banker. "We had no idea this was coming and quite frankly some of us are livid."

The question the bank bosses will discuss this afternoon is whether it remains sensible to sign up to Project Merlin, if they can't be certain that the government will resist the temptation to periodically bash them when the political heat is on.

"The whole point of Project Merlin was to reach an accommodation with ministers, to end bank bashing," said a banker. "Is there any point for us of doing Merlin if it begins with what some of us would see as betrayal?"

The government remains hopeful that Project Merlin will still be signed. An official said it was impossible to give the banks advance warning of the tax rise for legal reasons.

If it is signed, Project Merlin with involve the banks promising to make available £190bn of credit for businesses, supporting the government's so-called Big Society Bank, providing equity finance for medium size businesses in economically disadvantaged parts of the country, and showing restraint in bonus payments.

A senior banker said "this feels a bit like the last soldier killed before the armistice - if there is an armistice."

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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