Project Merlin: Banks pledge £10bn hike in small business lending

After several weeks of discussions, the government has unveiled details of its lending deal with the UK's biggest banks.

Chancellor George Osborne made the long-awaited announcement in the House of Commons on Wednesday and said as part of the agreement, known as Project Merlin, HSBC, Lloyds, Barclays, Royal Bank of Scotland and Santander have agreed to lend £190bn to businesses this year, £76bn of which will go to SMEs which is a £10bn increase on 2010.

Al five institutions also committed a total of £1.2bn to regional growth funding including £200m to the Big Society Bank, which will support, not-for-profits, voluntary organisations and social enterprises.

The bonuses of bank chief executives will be partly linked to meeting the lending targets.

Total bonuses for UK staff at HSBC, Lloyds, Barclays and RBS will also be lower this year than last, while RBS and Lloyds, the two part-nationalised banks, have agreed to set bonus limits.

In addition, the salaries of at least seven of the highest paid banks executives will be made public. The government intends to consult on more strict rules which would require all large banks to publish the pay of the board plus the eight highest earners.