Alistair Darling on Wednesday attempted to defuse a growing row over the allegedly punitive terms of the government’s bail-out of three high street banks, when aides insisted there was no “blanket ban on dividends for five years”.

The chancellor’s clarification came amid mounting pressure from bankers and investors, who claimed Mr Darling had insisted on such onerous terms for the taxpayer-funded bail-out and that it was deterring ordinary investors from taking up new shares.

The chancellor reacted furiously to what he believed was an attempt by bank executives to renegotiate the terms of the deal, agreed between the Treasury and the banks only on Saturday, to the detriment of the taxpayer. But he signalled there was room for flexibility on dividends after the first year.

“If someone comes up with a better way of running the scheme, of course we will listen,” Mr Darling said. “But if they’re talking about getting themselves off the hook, that’s a different proposition.”

The dispute turns on the terms demanded by the government on the £9bn of preference shares included within the £37bn recapitalisation of Royal Bank of Scotland, Lloyds TSB and HBOS.

According to the terms announced by the banks on Monday, the preference shares, which carry a fixed interest rate of 12 per cent over five years, forbid the banks paying dividends to ordinary shareholders until the preference shares have been redeemed in full. Mr Darling’s team said on Wednesday that the bankers had failed to understand the terms of the deal or to explain it properly to investors, hence the Treasury’s need to “clarify” it. The Treasury denied any U-turn.

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