Banks 'nearing agreement' to improve lending to SMEs

A quartet of the biggest banks in the country are moving closer to an agreement with the government to lend up to £180 million to small businesses in 2011.

The agreement, known as 'Project Merlin,' is aiming to secure a commitment from banks to ensure improved lending to small and medium-sized businesses.

HSBC, Royal Bank of Scotland, Lloyds and Barclays are the banks involved in the talks, which could culminate in an agreement 'within weeks,' according to Treasury minister Danny Alexander.

Mr Alexander said that the agreement would 'enable the economy to move forward.'

Santander was originally involved in the talks, but has decided to pursue discussions with the government alone.

As the UK arm of the Spanish lender has already increased lending, there was speculation that it did not judge the Project Merlin talks to be relevant to it any longer.

Standard Chartered was also originally involved in the negotiations but decided to leave at the end of last year, saying that the project was not relevant to it.

Overall, the agreement should see British businesses being lent around £200 billion over the course of this year, with £180 million of that going to SMEs.