CHANCELLOR Alistair Darling has been warned by High Street banks that they will not pass on any further interest rate cuts, it was claimed last night.
A newspaper reported that Darling met bank officials on Friday and was told they were "not charities".
The government recently injected public funds worth 37bn into the Royal Bank of Scotland, HBOS and Lloyds TSB, and Northern Rock and Bradford & Bingley were also bailed out by taxpayers, so the combative stance taken by bank executives will anger many of their customers.
The decision of the Bank of England to slash interest rates by 1.5% on Thursday resulted in most High Street banks announcing they would pass on the full cut to consumers. But HSBC and Barclays, neither of which has requested Treasury funds, have kept their rates the same.
According to the report, bankers at the meeting with Darling the following day said their reduced rates represented a "line in the sand".
"Base rates are now so low that our margins are desperately small," one adviser is reported to have said. "This point was made quite clear to the Chancellor by several of the executives: we are not charities."
Darling was said to have threatened the bankers with "prescriptive" measures to force them to pass on any future cuts in interest rates.
"It was a difficult meeting," said one banking source. "Right at the start the Chancellor's people thrust unflattering newspaper headlines under the executives' noses. We then had to make it quite clear that just because rates fall, it does not mean we can afford to do the same with our products… The issue was unresolved."