Lloyds (LYG) Considering Giving Up Govenment Aid

According to reports from the Wall Street Journal, Lloyds Banking Group plc (NYSE: LYG) is considering the bold move of moving away from a U.K. government asset guarantee program.

In March, Lloyds reached a deal with the U.K. government to insure £250 billion of the bank's bad assets, mostly in portfolios acquired with HBOS. The insurance puts a cap on the losses the bank could suffer on the bad loans, but requires Llyods to pay a big fee and surrender a majority stake to the state. Now Lloyds wants to reduce the amount of assets it had planned to insure with the government, which would reduce the fees owed by Lloyds and reduce government control of the bank.

If Lloyds doesn't participate in the government's asset guarantee program, it would have to raise about £6 billion by some estimates to maintain an adequate capital buffer.

Banks in the U.S., including Bank of America (NYSE: BAC), have also been looking at ways to back away from U.S. government asset guarantees.

Link to WSJ Article

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