The Governor of the Bank of England, Mervyn King, launched an attack on leading banks, describing their harsh treatment of corporate clients as "heart breaking".
King said the way some banks are treating business clients who had been customers for many decades, was leading to a heartbreaking situation in Britain's small and medium-sized business sector.
BoE figures show that net lending to companies across the UK fell for the third straight month in May, by about £2.3bn.
The Governor told the Treasury Select Committee that claims by banks that corporate lending had declined because of a lack of demand were "not an adequate response".
He accused lenders of riding roughshod over longstanding business relationships, and in unusually emotional language told MPs on the Treasury Select Committee that it is "a lot harder to build a business than it is to sit in London and trade away."
King's blunt message to the banks came as he prepared for a powerful new role as chief watchdog over the City of London, after the Treasury launched a consultation on granting the BoE unprecedented powers and disbanding the Financial Services Authority.
