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Lloyds and the United Kingdom have struck a deal where the government would insure more than $353 billion in Lloyds' assets, the Wall Street Journal reported Friday, citing a person familiar with the matter.
The deal would also increase the government's stake in the bank to as much as 75 percent, the newspaper said.
The action comes as a larger government effort to stabilize the banks in Great Britain.
That effort is aimed at putting a lid on any more crippling losses at banks as it requires banks to pay a fee and take a "first loss" on bad assets before the insurance kicks in.
"I think it helps only because it takes another piece of uncertainty away. I don't think it's on the front burner for a lot people in the U.S., but let's put it this way, how would you like to come in Monday morning with with a British bank failing," said one New York trader to CNBC.
The government and Lloyds, which trades in the United States under ticker symbol LYG [LYG
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], had been locked in intense talks this week that were focused on the size of the stake in Lloyds that the government would hold.
Lloyds officials were insistent on avoiding a deal in which the government's stake in the bank would rise above 50 percent. The government currently owns 43 percent.
A delay to the deal raised concerns talks had run into trouble. Lloyds said the delay was due to the complexity of the talks.
Britain's business secretary, Peter Mandelson, said earlier on Friday that talks over Lloyds' participation in the scheme, which would give the bank some protection against further losses on its risky credit-related assets, were difficult.
"Obviously, when you're making a change like this, introducing new measures or instruments to enable the banks to to recover, it involves a negotiation about the terms, the pricing and all sorts of conditions that are attached and that involves a fairly difficult, tough negotiation between the government and the banks," he told Sky News.
This new agreement could be announced late Friday in London, according to people familiar with the matter.
Reuters contributed to this story
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