FSA set to challenge Lloyds bank fundraising
Lloyds bank's plans to raise around £10 billion to shore up the balance sheet and allow it to pay for its role in the toxic debt insurance scheme, run by the government, are under close scrutiny by the Financial Services Authority (FSA). City insiders believe that the FSA is looking to stress test the Lloyds bank balance sheet amid indications that the company's involvement in the asset protection scheme could be less than the recently announced £260 billion.
It is no secret that Lloyds bank, led by its new chairman, is dead set against the UK government increasing its 43% stake and ultimately taking control of the operation. Without the £10 billion rights issue the company would be forced to pay for its involvement in the toxic debt insurance scheme by issuing new shares to the government which would take the government's shareholding well over 50%. However, there is a fear that Lloyds bank is looking to sail "a little close to the wind" which is why the FSA is apparently looking at new stress tests.
If the figures used by the FSA vary significantly from those used by Lloyds bank in its own stress test then we could see further pressure on Lloyds bank directors to allow the UK government to become more involved.
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