Lloyds poised to agree £2.5bn APS break fee

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The Independent Online

The part-nationalised Lloyds Banking Group is set to pay £2.5bn to avoid the Government's asset protection scheme (APS). The move could be announced as early as next week.

Discussions between Alistair Darling, and Lloyds about its desire to opt out of the toxic assets insurance scheme are at an advanced stage, according to a souce close to the talks. He confirmed the £2.5bn "break fee" but cautioned that the Chancellor "still has to agree to the deal". Lloyds and the Treasury declined to comment.

The bank will pay the fee in return for its toxic loans being "implicitly guaranteed" by the Government under the protection scheme unveiled in March. Under the terms of the deal, Lloyds must pay £15.6bn in shares to join the APS. There was talk that the bank would pay just £150m. Before approving the deal, Mr Darling has to be convinced that Lloyds will be able to strengthen its balance sheet through a rights issue that could raise up to £15bn, a bond issue and sales of assets.

*RBS is finally expected to announce the disposal of its insurance units, including Churchill and Direct Line, next week as part of deal to win European Union approval for state aid.