Following protracted negotiations, Lloyds Banking Group (LBG) and the Treasury have agreed terms to allow the bank to participate in the Government’s Asset Protection Scheme.
It is hoped the agreement will restore confidence in banks, as the Government will underwrite losses from assets placed in the scheme. Royal Bank of Scotland has already lodged £325 billion in the scheme, and LBG will add a further £260 billion, 83% of which were originally HBoS assets.
The Bank is responsible for the first £25 billion of any loss, and in return for the Government underwriting further losses, will pay a fee of £15.6 billion.
The deal could see over 75% of the bank in public ownership, and includes a legally binding agreement for LBG to lend £3 billion to homeowners over the next 12 months, and a similar figure in the following period.