Santander setback for bank lending talks

Pressure on the banks increased as talks continue
Pressure on the banks increased as talks continue

By staff

Spanish bank Santander's withdrawal from talks seeking a lending agreement is the latest blow to David Cameron's economic recovery agenda.

The prime minister has pledged to focus his 2011 agenda on jobs and is hoping to have agreed a deal with banks by the end of January.

It had been hoped that the government could persuade banks to commit to £200 billion in commercial lending, as well as a £1 billion to Mr Cameron's 'big society' fund.

But yesterday evening Santander quit the Barclays-led talks. Discussions with HSBC, RBS and Lloyds are continuing, however, with agreement expected to be reached by a January 23rd deadline.

Last night education secretary Michael Gove upped the pressure on the banks by targeting bonuses, at the end of a week which saw Barclays boss Bob Diamond insist the time for bankers' "remorse" was at an end.

"The sense of contrition for what went wrong in the banking crisis seems to be invisible," he said on BBC1's Question Time programme. "The banks have to show they get it."

Some Liberal Democrats are beginning to suspect the coalition's lack of stronger action against bank bonuses may be the fault of Mr Cameron, however. They believe he has retreated from a previous hard line on bonuses in order to secure the forthcoming lending deal.

"You don't wave the white flag in the middle of tough negotiations," Lib Dem Treasury spokesman Lord Oakeshott told the Independent newspaper.

"This is the moment of truth on fairness for our coalition. We can't allow a bonus bonanza in the age of austerity."