Banks face pay pressure after lending failures

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.

News
Ian Thorpe had Rio 2016 in his sights
people
Sport
Jonathan de Guzman of the Netherlands and Willian of Brazil compete for the ball
world cup 2014LIVE BLOG: Hosts Brazil take on the Netherlands in third-place play-off
News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
life...and the weight loss industry is rubbing its hands in glee
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Arts and Entertainment
'Eminem's recovery from substance abuse has made him a more potent performer, with physical charisma and energy he never had before'
arts + entsReview: Wembley Stadium ***
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice