The government has announced plans to create a new panel to monitor the extent to which banks are lending money to small firms.

At the first meeting of the Small Business Finance Forum, the five main high street banks agreed to provide data on the availability, risk and cost of finance to small companies.

The forum also secured an agreement from the British Bankers' Association to work with small business organisations to review how banks and small firms work together.

"It is critical we understand what finance is available for small businesses and this monitoring panel will give us greater insight into the situation at ground level," said business secretary Peter Mandelson, who chaired the forum.

"We have opened up a dialogue between small firms and banks, and we will continue to work together to make sure we have the resources in place to see UK plc through this difficult economic climate."

The British Chambers of Commerce and Federation of Small Businesses have warned that the banks' failure to lend money to small firms could lead to many companies going out of business.