Banks are set to come under renewed pressure from the government to increase lending to small firms.

 

Business Secretary Vince Cable says banks are "not acting in the national interest" and measures may be needed.

He has suggested dividends and bonuses could be a target as part of a "carrot and stick" approach to boost lending.

Cable is due to unveil a joint consultation paper with the Treasury later containing options to improve cash flow to businesses.

These include penalties on executive remuneration for failures to boost lending.

In a Sunday Times interview, Cable said: "We are very worried about the behaviour of the banks."

He said: "The banks are not acting in the national interest. I don't think they get it.

"At the moment we are talking to them in an amicable way and we are monitoring them, but if this doesn't work there are combinations of carrots and sticks that can be employed and they are under no illusions about that - and we are not either."

Cable added: "What we would question is whether banks should be paying out dividends and bonuses when that money could be used to... support small business lending. "

Aides to the business secretary later told the Press Association that compelling banks to sign up to loan agreements was a "last resort" .

The British Bankers' Association said High Street banks lent £6.8bn in June.