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Lloyds bank in line for £2.5 billion hit

Rumours in the city today suggest that Lloyds bank is in line for £2.5 billion hit in order to allow the company to withdraw from the UK government's toxic asset insurance scheme. This is a scheme which was originally brought together to allow troubled UK banks to insure their potentially toxic assets and effectively strengthen balance sheets in the short to medium term. However, a recovery in the economy and the banking system has reduced the need for the scheme, although Lloyds bank, which had previously committed to the scheme, is having trouble pulling out.

It is believed that the UK government, which holds a 43% stake in Lloyds bank on behalf of UK taxpayers, is set to charge Lloyds bank £2.5 billion to withdraw from the scheme. This comes at a time when Lloyds bank is rumoured, depending on whom you believe in the city, to be looking to raise between £5 billion and £20 billion in the short to medium term. The situation is taking some time to resolve, but hopefully this is stage one over, i.e. confirmation of the terms of the withdrawal from the asset protection scheme, and we can now move on to the real business.

Lloyds bank investors will be relieved once the situation is finally resolved!

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