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Why has the Lloyds Bank toxic asset deal been delayed?

There are differing stories come from the UK Treasury and Lloyds Bank regarding reasons why the proposed £165 billion toxic asset insurance protection plan has not been put into place. The official line from Lloyds Bank is that those at the centre of the discussions have been working all day and all night on the Royal Bank of Scotland deal and are available at this moment in time. The impression given by the UK Treasury is that talks are continuing and an agreement will be reached next week.

The fact that neither side is able to fully explain the reason for the delay has caused confusion and concern in the UK stock market. Lloyds Bank shares fell sharply on Friday as news filtered through to the market amid concerns that the group would be nationalised and shareholders effectively wiped out. It appears as though the Lloyds Bank board of directors are fully intent on staying independent at this moment in time but as trading conditions worsen and the balance sheet is weakened further, this option may be taken out of their hands.

While only a week ago it seemed as though the UK banking sector was literally back on its feet the toxic asset situation has blown away any hope of a quick recovery.

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