A source close to Santander UK, whose new chief executive Ana Patricia Botin attended the meeting, told City A.M.: “It’s horse-trading: can we make a commitment on lending to small businesses and the Big Society bank in return for leniency on pay.”
The government has emphasised to banks that it wants a reduction in the size of the bonus pool to accompany a “change in culture” on pay, but is prepared to strike a deal if banks give other concessions. In response, the UK’s banks have offered to lend £70bn to small businesses next year, versus around £60bn this year.
The meeting, which had been delayed a day due to Osborne being stranded in New York by the snow on Monday, was part of a series of planned gatherings as part of “Project Merlin”, a cooperative initiative between banks aimed at reviving the industry’s image.
In place of attending the meeting on Monday, bank chiefs held a phone conference to discuss a framework for negotiations with the treasury.
The treasury is already reluctant to take further action on bonuses in part because of regulation already introduced by the EU and the Financial Services Authority.
Regulations published last week forbid financial institutions from paying any more than 20 to 30 per cent of a bonus in cash up front, with half of any bonus obliged to be in the form of non-cash instruments such as shares. The scheme is the most stringent in the world.
However, the government has said that it does want action on pay disclosure, a cause championed by Cable.