Darling clashes with banks over lending
Alistair Darling is set to call the high street banks to task today over lending to small businesses.
The chancellor is meeting with the chief executives of the major high street banks to question them on their pledges to increase lending.
However, the banks are claiming lending rates are high because of government restrictions on them.
In particular, the chancellor will be focusing on high lending rates.
"They've got to live up to their promises," Mr Darling told BBC 1's Andrew Marr show.
"What companies are being charged does seem to have gone up relative to what banks are actually having to pay because of the fact we've got very low interest rates."
He added the savings of banks and support through guarantee schemes was not "some sort of charitable act".
"We did it because if you don't have a banking system that provides credit for businesses, then you will make recovery and prosperity after that much, much more difficult," the Chancellor told the BBC.
The banks have come out defending their position.
Lending figures for June from the British Bankers Association (BBA) show term lending rose £366 billion and businesses' overdrafts were up by £25 million.
Some 49,579 new business banking relationships were established.
The banks have also defended the pricing of loans - stating banks' costs have increased despite the Bank of England holding interest rates at 0.5 per cent.
The BBA points to increase capital requirement imposed by the government tying up finds that cannot be lent, higher levels of defaults and demands to restructure existing debts.
"Banks are paying relatively more for their money as a result of both competition for savings and scarce and expensive wholesale funding," a BBA spokesperson said.
"The cost of funds the authorities made available through the Credit Guarantee Scheme is also expensive at a time when returns on loans - arising from the very low interest rate environment - are lower."
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