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Lloyds in talks with Treasury to insure £250bn of toxic debt
Hugo Duncan6 Mar 2009
The taxpayer today looked set to take control of another high-street bank in a multi-billion-pound rescue.
Lloyds Banking Group and the Treasury were thrashing out terms of a deal to insure more than £250 billion of the bank's toxic assets.
It would see the taxpayer increase its stake in Lloyds from 43 per cent to as much as 70 per cent. But Lloyds is reluctant to hand too much control to the Government and the bank and the Treasury were today haggling over exactly what stake the taxpayer will take.
Lloyds bosses are furious that details of a potential deal were leaked and today insisted an agreement has not yet been reached even after a week of negotiation.
Chancellor Alistair Darling has agreed to an outline deal that would see the Government insure £258 billion of toxic assets held by the bank, which was created by the emergency takeover of failed lender HBOS by Lloyds TSB.
Mr Darling and his Treasury officials have proposed a fee to insure assets that would increase the stake in the bank held by the taxpayer. Lloyds chairman Sir Victor Blank and chief executive Eric Daniels are understood to think this is unreasonable.
The stakes could not be higher for the bank or the Government, which has already injected £17 billion of emergency funding at the time of the merger.
That deal was brokered by Gordon Brown and his friend Sir Victor but has since turned sour as massive losses at Halifax and Bank of Scotland owner HBOS dragged Lloyds into the mire.
One big investor in Lloyds suggested Sir Victor's head should roll. “His move to buy HBOS has blown up the bank,” the investor said. Another added: “It is a great pity that Lloyds management got itself into this mess by agreeing to buy HBOS.”
Many in the City and Westminster believe full nationalisation of struggling banks is now inevitable. A Lloyds spokesman said: “We have not yet concluded our discussions and there can be no certainty about the outcome. Our objective is to secure the best possible deal for our shareholders.”
The Treasury said: “Discussions are ongoing. A deal will be announced at the conclusion.”
The proposed deal is part of the Asset Protection Scheme set up to insure banks' riskiest assets against further losses in an effort to get them lending again. RBS signed up last week to insure
£325 billion of assets.
Reader views (9)
Is this why the Government wanted to expedite the emergency takeover of HBOS by Lloyds TSB rather than have to go through the full due diligence and Competition Commission processes?
It does appear to have been rather convenient for the government, doesn't it?
Would this amount to "insider trading" by the goverment?
- Fraser, Telford Park, 08/03/2009 13:02
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Lloyds must be delighted that the deal brokered by Gordon Brown has turned them from a profit making entity into another nationalised dud.
- James Elliott, Eastbourne UK, 06/03/2009 17:33
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What a clever lot the Tax Payers are; buying toxic waste on the cheap from bankrupt banks?
Talk about the Monty Python Show……………LOL.
Makes polluting plastic Shopping bags; look like pure silk.
- Mickyinlondon, london, 06/03/2009 16:21
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As a small shareholder I voted against the HBOS deal, as I felt anything brokered by this disgraced and crooked government was tainted with spin ancd sleaze. The institutions voted for it as they couldn't let the chance slip to own a huge bank. No-one seemed to ask to see behind the balance sheet of the HBOS debacle, and yet it's the first thing banks ask you for if you go to borrow money - balance sheet, cashflow, and business plan. Heads must roll for this shambles, imagine being stitched up by Brown and his cronies, and the shambolic treasury - shame on you!
- John Keating, romsey hampshire, 06/03/2009 15:25
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Another false market on the stock exchange created by the UK Government.
- Dai, london, 06/03/2009 14:04
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Just nationalise the lot and stop dragging your heals brown and darling... Don't you get it yet?
- Dc, London, 06/03/2009 12:49
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Lloyds, stay WELL CLEAR of anything the Government has to offer !!! Let it sort out it's own filthy mess .......
- Marianne, SW France, 06/03/2009 11:49
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I thought from the headline that this was going to be a story about trying to get Lloyds of London to insure the government!
Which raises the question: if they wouldn't take on such a risk, why should the taxpayer? Has any attempt been made to lay off this risk in the commercial insurance sector, or is that a naive question?
- Mdj E10, london, uk, 06/03/2009 11:33
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Lloyds can't announce a deal today. Robert Peston is out of the country.
- Andrew, London, 06/03/2009 10:43
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