SANTANDER UK last night pulled out of collective banking industry talks with the government designed to secure specific lending targets, instead entering into direct negotiations with the Treasury.
The industry initiative, known as “Project Merlin”, centres around a truce whereby banks will commit to lend more to small and medium-sized businesses in return for no further crackdown on bonuses from the Treasury.
But Santander UK, which is predominantly a retail bank, has little to gain from cutting a deal on bonuses, since it does not award huge pay-outs to its UK-based executives.
In a blow to Prime Minister David Cameron’s plans for a “big society bank”, funded from unclaimed bank assets but topped up with a planned £1bn contribution from each bank in the talks, Santander is now unlikely to make a direct contribution to its set up. “Santander favours direct investment programmes – such as our work with universities in the UK and around the world – rather than aggregated funds solutions,” said a source close to Santander.
The bank’s withdrawal cuts the number of participants in the talks down to just four of Britain’s major banks: HSBC, Barclays and semi-nationalised banks RBS and Lloyds.
HSBC’s full participation is also believed to be in doubt due to its main focus being outside the UK.