Britain's banks and the Treasury face calls to give details of how bosses' pay is to be linked to small business (SME) lending after figures this week showed the banks were on track to miss targets.
Lord Oakeshott, the Liberal Democrats' former Treasury spokesman, is tabling a parliamentary question demanding more detail on the assurance given by the Chancellor when his Project Merlin agreement with the banks was announced in February.
His question will ask how pay is linked to the SME target, how it is measured, how the Chancellor will make sure bonuses reflect it and what sanctions will be used if they do not.
Under February's Merlin deal the big banks agreed to make £190bn available to British businesses. First-quarter figures showed them roughly on track but SME loans were about £2bn short of the target. SMEs were a crucial part of the deal because they account for more than half the economy and rely on bank loans more than bigger companies.
The Chancellor said in February: "To help ensure today's agreement is honoured, for the first time the pay of the chief executives of each bank, as well as the relevant business area leaders, will be linked to performance against the SME lending targets."
But the banks' annual reports give no details of how the SME lending commitment affect pay. There is further uncertainty because the banks' interpretation of Merlin – that they only need to make credit available – is harder to measure than actual loans.
"Mr Osborne said bank chief executives' remuneration is linked to their lending targets but where is the evidence and how does it work?" Lord Oakeshott said yesterday.
"Or was that just a pious hope rather than something we can test?"
Barclays, Lloyds, HSBC and Royal Bank of Scotland declined to give details though they said SME lending was included in executives' pay targets. The Treasury also declined to give details.
The lack of information about Merlin's effect on pay is also of concern to shareholders. If the pay of chief executives and senior managers is linked strongly to the volume of SME lending it could skew their decisions.
George Dallas, director of corporate governance at F&C Asset Management, said: "Having clear disclosures about what the SME commitments are and the extent to which management is being incentivised would be reasonable.
"When it comes to being holders of bank securities, is this a good idea? It could be because we want the macro economy to have access to finance but we also want micro prudential management that is solid and that won't be compromised by a disproportionate focus on one aspect of their agenda."
The disappointing Merlin figures came in a week that saw Lloyds fined more than £3m for poor complaints handling at its Bank of Scotland business and the announcement of more than 1,000 job cuts at Lloyds and RBS.
Those events followed the industry's climbdown on paying out billions in compensation to victims of personal protection insurance mis-selling.
Lord Oakeshott was rebuffed when he enquired about the pay of Antonio Horta-Osorio, the new chief executive of Lloyds Banking Group.
When Mr Horta-Osorio was appointed in November the bank said SME lending would be part of his pay targets. Lord Oakeshott asked the Treasury for details but was told SME loans would be "an element" of his pay, which was up to Lloyds' board.