Mandelson criticises behaviour of bank managers

Lord Mandelson today criticised the "alarming" behaviour of bank managers' in their treatment of businesses.

The Business Secretary welcomed Royal Bank of Scotland's announcement that it would freeze overdraft charges for small firms until the end of next year.

"I hope other banks will follow," he told BBC1's Andrew Marr Show.

But he went on that he was hearing worrying reports about the actions of some local bank managers summarily changing the terms of facilities with small businesses.

While playing down the prospect of full-scale nationalisation, he said it was vital to change "the behaviour of the managers of the banks, not just at the national level, but at area level and the local level".

He added: "The stories I'm hearing I must say are alarming. I know the banks say they are not representative and actually bank lending is being maintained.

"But if it is the case that banks locally are unilaterally rearranging overdraft and lending facilities, sending this information out by email without even a face-to-face meeting with those who are taking on the loans, ordering those they are lending to to comply with their requirements within 48 hours, that is not the sort of constructive relationship that is sustainable between banks and businesses."

He said threatened further meetings - "as many as necessary I might say" - between the banks, businesses and the Government to ensure that a new code of behaviour is adhered to.

"I don't think we need to take bigger holdings, what I do think we need to see is the banks responding to what is being doing to help them out in this situation," Lord Mandelson added.

"I want a constructive relationship with them, of course, but they have to know that they are going to be tested and judged by what they do and what role they play to help Britain and British business get through this economic storm."