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Lloyds bank in talks to scale back asset protection plan participation

After yesterday's revelation that Lloyds bank failed a Financial Services Authority (FSA) stress-test, regarding its plans to withdraw from the UK government's asset protection scheme, directors have now put forward a scaled-down version of the scheme. It is believed that Lloyds bank directors are currently in talks with the UK Treasury regarding a possible reduction in the company's asset protection cover which will ultimately reduce the premium.

It would appear that the company is canvassing institutional investors regarding a possible rights issue or other fundraising which would raise funds for the premium required for participation in the asset protection plan. One of the main concerns had been the fact that if the company is unable to raise additional funding it would be forced to hand over shares to the value of the premium to the UK government. This would see the UK government's stake in the company increase from 43% to well over 50%, something which Lloyds bank directors are very keen to avoid.

While this saga has been ongoing for some time, there is a feeling within the city that we are nearing the end game and it should be resolved over the next few days. Uncertainty is not helping the city, investors or the company.

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