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UK Treasury looking to slim down Lloyds bank cash call fees

The UK government is said to be on the verge of agreeing a £10 billion rights issue by Lloyds bank but the government is not happy about the size of fees which will go to advisers and underwriters. Yesterday there was talk that the issue would cost Lloyds bank in region £300 million and the government is said to be furious at this figure which they believe is grossly exaggerated.

However, when you consider that the UK government has apparently demanded that Lloyds bank pays an exit fee of £1 billion with regards to its removal from the asset protection scheme does Gordon Brown really have a leg to stand on?

The problem is that the higher the risk that a fundraising will fail the higher the fees because obviously underwriters and advisers are taking on more risk. In relation to the asset protection scheme, it is rumoured that Lloyds bank will learn over the next few days whether it can exit at a greatly reduced fee or whether it will have to pay a potential £1 billion compensation settlement. At a time when the company is looking to retain as much cash as possible and rebuild the balance sheet, it is rather bizarre that the government, which is the majority shareholder on behalf of UK taxpayers, is attempting to extract around £1 billion itself.

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