Business Secretary Vince Cable has warned banks could be subject to extra tax if they do not increase lending to small and medium sized businesses.
Cable told MPs on the Business Committee the level of lending to SMEs is a "serious problem", reports the BBC.
"The chancellor and prime minister have made it clear that if we don't get results, they have said we should take further action with tax on banks," he said.
The warning comes as the heads of HSBC, RBS, Barclays and Lloyds prepare to give evidence to the Treasury committee to answer questions on the Independent Commission on Banking.
Cable's tough stance comes in the wake of banks missing a lending target of £19bn a quarter, as set out under Project Merlin. Banks lent just £16.8bn in the first three months of the year.
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