Mandelson puts pressure on banks over business loans

Downing Street stepped up pressure on the banks this afternoon to give struggling industry a lifeline of cheaper loans.

As chief executives of the leading banks faced a dressing down at the Treasury, the Prime Minister's office warned they had not lived up to pledges given when they needed bailing out by the taxpayer.

Business Secretary Lord Mandelson announced that he would be joining Chancellor Alistair Darling at the talks. He said that pledges to lend more had been "an integral part" of the deal to recapitalise the banks.

"Those agreements have got to perform better in the future and that is what we will be discussing with the banks' representatives this afternoon," added Lord Mandelson.

The Business Secretary said he expected banks to say the problem was a lack of demand for lending. But he made clear that was not a good enough excuse.

"The Chancellor and I are not satisfied that lending is as it should be," he said. "We are also concerned about the cost of lending and that is what we will be focusing on this afternoon."

Mr Darling said yesterday he was "extremely concerned" that firms were paying too much for credit when base rates are 0.5 per cent. He warned that government bail-outs were not made "out of some charitable act" and called on banks to play their part in reviving the economy.

Chairmen and chief executives from the major banks, such as HSBC and Barclays, who have not needed bailing out, and Lloyds and Royal Bank of Scotland, who have been given billions in emergency funding, were at the meeting.

Angela Knight, chief executive of the British Bankers' Association, insisted lenders were "meeting their part of the bargain".

But Stephen Alambritis, chief spokesman for the Federation of Small Businesses, said the Chancellor was "quite right to haul in the banks".