Lloyds Bank and UK government at loggerheads
It has been revealed this evening that Lloyds Bank and the UK Treasury are at serious loggerheads over the proposed £250 million toxic asset insurance deal. It appears as though Lloyds Bank is unwilling to pay the substantial premium demanded by the authorities which is rumoured to be larger than that charged to the Royal Bank of Scotland, which is effectively under government control. So what next for Lloyds Bank?
The difficulty at the moment is the fact that the Lloyds Bank toxic asset deal is very much linked to the proposed increase in the UK government's stake in the bank. It is well-known that the directors of Lloyds Bank would rather remain independent and block the UK authorities from building up a majority stake. This strategy, together with the failing toxic asset deal, has forced both parties to retreat although it seems highly likely that the government will increase its stake in Lloyds Bank in due course.
The longer the uncertainty goes on the more damage it will do to the share price and the reputation of Lloyds Bank and the government are well aware of this. A compromise agreement is vital in the short term otherwise there will be further chaos in the UK banking sector when the stock market opens again on Monday.
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