Lloyds forced to revisit Asset Protection Scheme

by Gill Montia

Story link: Lloyds forced to revisit Asset Protection Scheme

Efforts by Lloyds Banking Group to steer clear of the Government’s Asset Protection Scheme (APS) have met with failure.

The Financial Services Authority has stress-tested the bank’s plans to raise capital and avoid the APS, and has thrown them out.

According to reports, Lloyds has been working on a £15 billion fundraising involving a right issue and other means.

However, to meet the lending commitments attached to Government support already received by the group and to withstand further writedowns on bad debt, particularly from the HBOS side the business, analysts estimate that the group’s balance sheet needs to be bolstered by over £20 billion.

Currently, the taxpayer owns 43% of the group but participation in the APS could raise the stake to over 70%.

Such a move would increase the likelihood of a forced break-up of the bank by the European Commission, which has been scrutinising the positions of state-aided banks in the light of competition regulations.