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Would the city support a £10 billion rights issue by Lloyds bank?

As Lloyds bank continues its attempt to reduce the influence of the UK government over the operation, there are signs this evening that some influential institutional investors would possibly support a potential £10 mbillion fundraising. Lloyds bank is in need of a significant cash injection because of the multibillion pound cost of joining the government's bad debt insurance scheme which would ultimately have to be paid in "new shares".

The issue of these "new shares", if it occurred, would take the UK government's stake in the operation to well over 50% and increase the influence and power of the authorities over the bank's board and the bank's operations. New chairman Eric Daniels, who takes over from Victor Blank, is adamant that the UK government will not increase its influence over the company and has been trying to curry favour with institutional investors for a significant fundraising.

Even though a £10 billion fundraising would go some way to addressing the immediate issues for the group, it would in no way wipeout the bank's debt and there would still be many issues to address in the future. This is certainly a test of the city's nerve and determination to support the UK financial sector in these most difficult of times.

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