Challenger banks have called for an extension to the Government's flagship industry funding scheme during a meeting at which they expressed fury at plans for a tax surcharge that will hit their profits.
Sky News has learnt that a group of bank bosses who met with senior Treasury officials on Friday requested that the Funding for Lending Scheme (FLS) be extended beyond its intended expiry date next January.
A source who attended the meeting said the banks had urged that any extension of the FLS, which was launched by George Osborne in 2012, should be reserved for lenders with balance sheets of less than Â£20bn & which were expanding their net lending to small businesses.
The proposal, which the Treasury said it would consider, according to the source, was made during a sometimes-fractious summit attended by roughly 10 bank executives.
Among the so-called challengers represented at the meeting were Aldermore, Close Brothers, Metro Bank,Â OneSavings Bank, Paragon Bank, Secure Trust Bank, Shawbrook andÂ Tesco Bank.
They had sought discussions with the Treasury following the Chancellor's announcement in his July Budget that banks would be subject to an 8% Corporation Tax surcharge on profits of more than Â£25m.
The insider who attended the meeting said the Treasury was resistant to the idea of a blanket increase in the Â£25m threshold, yet appeared more receptive to a proposal for 'staircasing' the impact of the tax depending upon the size of banks' balance sheets.
The banks moreover suggested that a working group should be formed to discuss ways in which the tax surcharge could be mitigated.
"They seemed to say that they would listen to ideas that would mean the revenue-take would be the same, yet without committing to a working group," said the source.
Banks moreover raised a long-held complaint that they are subject to an unlevel playing field which penalises their lending by forcing them to hold more capital by comparison with larger banks.
The Treasury declined to comment on the meeting other than to say it was routine for Government officials to meet with industry to discuss a range of issues.
Earlier this week, Sky News revealed thatÂ EY, the professional services firm, had undertaken research which showed that Mr Osborne'sÂ industry tax reforms would raise far more revenue than forecast by the independent Office for Budget Responsibility.
EY's work concluded that while the total tax take from challenger banks will remain a small proportion of the overall tax take from the sector, Â£5.95bn in tax revenue could be achieved from just 10 of the other lenders.
A letter from some of the challenger banks to MPs representing constituencies where they employ substantial numbers of people had warned that future job creation could be jeopardised by the move.
Mr Osborne told the industry in a recent letter that there would be no alter to the surcharge "in this fiscal year", a statement which has sparked hope among some bank executives that the Government will reduce or abolish it next year.
Source: “Sky News”