Here we go again - the bickering between UK politicians and bankers over lending is back.
Project Merlin was supposed to put a stop to all that. It was a truce under which the government would stop bashing the banks for their sins over the financial crisis. In return, the top five banks that signed the deal promised to curb bonuses and, more crucially to the economy, to increase lending to businesses.
The banks - Lloyds, Royal Bank of Scotland, Barclays, HSBC and Santander - were given a year's target of lending out £190 billion (Dh1.14 trillion) to businesses, £76bn of which would go to small and medium enterprises (SMEs). Bank of England data last week show that they are not up to speed: in the first three months of the year, the Big Five lent £47.2bn to businesses, failing to meet the £47.5bn quarterly target.
A major point of tension between ministers and bankers, however, is the bigger shortfall in SME lending, with the banks managing only £16.8bn of the £19bn promised.
It is not clear which of the lenders - and it could be all of them - are behind track, but the figures have disappointed the prime minister David Cameron. "It was a deal. It was an agreement," he says. "They have to meet their side of the agreement or we don't have to meet ours." Cue: fulfil the target for the year or the banks could face new taxes that were shelved under the agreement.
The banks countered these are still early days for the deal, which was thrashed out only in February. They say the figures show "a solid start to the year" and their determination to lend. They are providing finance to small businesses, they insist, but demand has been muted.
The banks also cite an April survey by the Confederation of British Industry on SME expansion intention. It showed that 69 per cent of SMEs were most concerned with order levels while only 8 per cent cited finance as a worry.
The finding, they told the BBC, reflected the "efforts that the banks have made in honouring their Merlin commitments and in raising business confidence as to the availability of finance once economic demand recovers". To be fair, the lenders' argument has some legitimacy. The recovery has been limping along and the very cold weather at Christmas and the start of the year, and the chaos it caused, have affected many businesses.
But that is only one side of the story. Companies, on the other side, say the high costs of bank charges and the tough rules they impose - turning away even those with viable proposals - put them off borrowing.
It is not surprising that the banks have not met lending targets to small firms. A survey of members of the Federation of Small Businesses found only 16 per cent had approached a bank for credit and of those 44 per cent had been refused, says John Walker, the agency's chairman, which represents more than 200,000 businesses. He wants to see greater competition among banks to enable easier access to affordable finance for SMEs.
The Bank of England's latest inflation report shows credit conditions for larger companies have improved; for SMEs however, they remain "tight".
Ironically, it is the stringent post-crisis banking rules imposed by the government requiring higher capital ratios and strict liquidity that have put a check on the ability of banks to lend. Banks also have to maintain "responsible" lending standards after the disastrous effect of easy credit during the boom.
With these mitigating circumstances, the government's decision to wait for the full year before judging the banks' performance seems fair. Lenders may sigh with relief but there is no let-up, warns Vince Cable, the business secretary, who is seen as the nemesis of the banking world. "We will monitor the banks' performance extremely closely and if they fail to meet the commitments … we will examine options for further action."
Although Mr Cameron has admitted the deal needs more time to bear fruit, he has not minced his words either. "The banks recognise it is extremely unhealthy in a modern, competitive market economy to be in a permanent state of war with the politicians," he warns. There is still time to get more "money out of the door".
