Lloyds’ fundraising plans submitted to FSA stress test
by Gill Montia
The Financial Services Authority (FSA) is stress-testing Lloyds Banking Group’s plans for a rights issue, The Daily Telegraph has reported.
According to the newspaper, the retail banking giant is looking to raise £10 billion by selling new shares and has now submitted formal proposals for a rights issue to the Treasury, which has passed matters over to the FSA.
By raising new capital from investors the bank could avoid a level of participation in the Treasury’s Asset Protection Scheme that could see the taxpayer’s interest in the group increase from 43% to over 60%.
However, majority state-ownership may not be avoided because the regulator is reportedly scrutinising the proposals against the backdrop of a worsening recession and a surge in the level of the group’s bad debts.
Lloyds is also considering bolstering its capital position with the sale of assets, including insurance units Scottish Widows and Clerical Medical.
The latter was originally part of HBOS and is known to be of interest to Resolution Ltd, Clive Cowdery’s acquisition vehicle.