Treasury in toxic asset talks with Lloyds

Lloyds Banking Group is talking to the Treasury about amending the terms of a
plan to shore up its riskiest assets against further losses because economic
conditions have brightened up.

The Government Asset Protection Scheme has been rolled out to insure bank’s
toxic assets against further impairment and Lloyds had planned to put £260bn of
loans and investments into the scheme.

“However, in light of improving economic conditions and the results of
Lloyds’ detailed reviews of its loan portfolios and their expected performance,
Lloyds and HM Treasury are discussing possible changes to the commercial terms
on which Lloyds might enter into GAPS from those announced in March 2009,
including the possibility of reducing the amount of assets covered by the
scheme,”
Lloyds
said in a statement today.

The banking group 43% owned by the taxpayer is also considering possible
alternatives to entering into GAPS and is in discussions with the Treasury, UK
Financial Investments and the Financial Services Authority on this issue.

” 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,” Lloyds added.