Bank chiefs hold talks with PM

The heads of the UK's biggest banks gathered at Prime Minister Gordon Brown's weekend Chequers retreat as new plans to kick-start lending took a step closer.

Gordon Brown welcomed bank chiefs to his Chequers retreat Gordon Brown welcomed bank chiefs to his Chequers retreat

Lloyds TSB chief executive Eric Daniels and Barclays chairman Marcus Agius are among the guests along with Chancellor Alistair Darling and London Stock Exchange chairman Chris Gibson-Smith, the Sunday Times said.

A Downing Street spokesman played down the meeting, calling it a "long-standing lunch" which had been in the diary for some time.

But the gathering will fuel speculation over the latest steps to help a beleaguered banking sector and boost lending to ailing businesses.

Since October, UK banks have been given guarantees worth hundreds of billions and £37 billion in taxpayer cash to strengthen their finances. This has left the State as a majority shareholder in Royal Bank of Scotland and likely to own almost half of Lloyds TSB and HBOS when their merger completes this week.

Despite these moves, the Bank of England's latest survey said lending to businesses and households was set to decline further in the first three months of 2009.

The new aid plans - set to be unveiled in the next fortnight, according to the report - are said to include loan guarantees for firms of all sizes, and official insurance for securitisations of mortgages and other loans as suggested by former HBOS boss Sir James Crosby last year.

Before the credit crunch, banks raised vast amounts for new lending by "securitising" - packaging up and selling - loans of all types. But this market dried up when confidence was shattered in 2007 by rising defaults among US borrowers with poorer credit histories, making cash for lending scarcer and destroying the business model of now-nationalised Northern Rock.

The latest help for the beleaguered sector comes as leading accountants are said to have warned that they may not be able to sign off the accounts of the UK's leading banks.

At a secret meeting with City minister Lord Myners before Christmas, partners from the UK's "big four" accountants - Ernst & Young, PriceWaterhouseCoopers, Deloitte and KPMG said they were not sure they could state banks and building societies were a "going concern" under accounting rules, the Sunday Times added.

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