Banks will today be warned that the government may take the "nuclear option" and force them into full-scale nationalisation if they fail to resume lending to businesses.

In a strongly worded statement, John McFall, the chairman of the Commons treasury select committee, said banks should be "actively lending instead of sitting on their hands".

"Governments on both sides of the Atlantic have called on them to resume lending, and criticism has been directed to the banks that they are not shaping up to the task at hand," he said. "If the banks do not play ball, and will not resume lending, then the demand for full-scale nationalisation may well grow."

McFall said the strategy had proved successful in Norway, Sweden and Finland between 1991 and 1993.

"With major banks under public control, the governments would be in a position to instruct them to raise their levels of lending."

The West Dunbartonshire MP said that despite having been "pulled back from the brink" of collapse with a cash injection of £37bn from taxpayers, banks were "reluctant to launch their sizeable recapitalisation lifeboat and start lending again to households and businesses".

He said: "There are 4.7 million small and medium size businesses in the UK, employing 13.5 million people – almost 60% of the private-sector workforce. These are very large numbers. They need loans to help them sustain these important jobs."

In the current crisis, banks should not be hoarding capital but should be able to utilise their reserves to ensure that money is available for lending, McFall said.

There was a clear incentive for them to do this: "the £37bn funding to be provided by the Treasury is expensive, costing the banks 12% per year".

He said: "Banks may be diverting much of their income towards repaying this aid, rather than expanding their loan books. In my view, this must stop: banks may have to get used to the idea of being part-nationalised for a longer time. "If they don't then one answer would be for the state to step in again and guarantee mortgages and other retail loans If the perception gains hold that the banks are continuing to refuse to lend, then a website should be set up for small and medium businesses to report the fact that they have been refused a loan and record their dismay about the way they have been treated."