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Deputy prime minister Nick Clegg has warned banks the government will not stand idle if they fail to cut this year's bonus payments and increase lending to small businesses.
He called for "visible restraint" in the forthcoming bonus round and indicated he was determined the coalition would step in if necessary.
In an interview with the Financial Times, Clegg said: "The banks should not be under any illusion, this government cannot stand idly by.
"It is wholly untenable to have millions of people making sacrifices in their living standards, only to see the banks getting away scot-free."
Clegg said he wanted to end the tension between banks and government but banks needed to show restraint and reduce the amount they pay in bonuses in February and March.
"We can't do that unless we have a cathartic settlement where we see visible restraint from the banks and sensitivity to the context in which they operate," he said.
Banks should also make quantifiable promises on bank lending to small companies and make additional upfront funding available for start-up companies, he told the paper.
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