Lloyds faces £2.5bn fee despite avoiding APS

by Gill Montia

Story link: Lloyds faces £2.5bn fee despite avoiding APS

Lloyds Banking Group is reported to be proposing to pay the Government £2.5 billion to avoid participation in the Treasury’s Asset Protection Scheme (APS).

The sum represents a fee for an implicit guarantee given for the £260 billion in bad loans that Lloyds originally said it would place in the APS, back in March.

According to Sky News, Chancellor of the Exchequer, Alistair Darling, will announce the arrangement formally next week but only if the bank’s plans for a £21 billion fundraising receive official approval.

Shunning the APS would allow Lloyds to remain 43% state-owned rather than increasing the taxpayers’ stake in the business to 62% by formally taking up the scheme.

Last month it emerged that the Financial Services Authority was stress-testing Lloyds’ plans for a record breaking rights issue.

The regulator was reportedly scrutinising the proposals against the backdrop of a worsening recession and a surge in the level of the group’s bad debts.