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The British government will not underwrite a planned rights issue by Lloyds Banking Group, the Financial Times said on Thursday.
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Sharon Lorimer |
The newspaper quoted people involved in the process as saying that the government would definitely not make a commitment to mop up any unbought shares.
The FT said a refusal to underwrite any cash call would hamper attempts by the partly state-owed bank to raise enough money to free itself from a government toxic asset insurance programme.
Officials at Lloyds were unavailable for immediate comment.
Analysts and bankers have said Lloyds may struggle to raise even a few billion pounds from an expected debt swap, leaving a rights issue and asset sales as key to any exit from a government insurance plan.
Lloyds, 43 percent owned by the UK taxpayer, said last month it was considering an exit from the government's costly scheme to insure against losses from bad debts.
It may need to raise as much as 25 billion pounds ($40 billion) to satisfy UK regulators, industry sources say.
In a separate story, the Guardian newspaper said UK Finance Minister Alistair Darling was ready to hand over as much as 5 billion pounds ($7.99 billion) of taxpayers' money to Lloyds in order to shore up its finances.
The Guardian said negotiations between the bank and the government were continuing.
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