Britain's part-nationalised bank Lloyds said today that it was considering alternative options to the government's insurance scheme for toxic assets, citing improving economic conditions.
Lloyds Banking Group (LBG), which is 43% owned by the taxpayer after a huge bail-out, added that it might place fewer assets than previously expected in the Government Asset Protection Scheme (GAPS).
'Lloyds is considering possible alternatives to entering into GAPS' and is discussing them with the government and financial authorities, it said in a statement.
'All possibilities remain open and, as part of this process, Lloyds is focused on ensuring that any potential alternatives to GAPS would be in the interests of shareholders and other stakeholders,' the statement added.
Media reports had suggested that LBG was likely to take part in the scheme, which provides guarantees for risky assets, after a stress test was completed on the bank by the Financial Services Authority (FSA) watchdog.
The banking group had agreed in March to put £260 billion sterling of troubled loans into the scheme, but reports later said it was considering raising fresh capital by issuing new shares to reduce its reliance on GAPS.
Newspaper reports said today that the FSA had concluded this week that the bank would have to significantly raise its core capital after carrying out the stress test.
The Times newspaper, which did not cite its source, reported that Lloyds was effectively barred from pulling out of the scheme unless it raised capital levels, which are a key measurement of a bank's financial strength.
