FSAwill test Lloyds’ plans
LLOYDS Banking Group’s ambitious plans to launch a giant cash call in a bid to reduce its reliance on the government are thought to have been passed to the City watchdog for stress testing.
The Financial Services Authority (FSA) is understood to have been called in to stress test the plans, to judge whether Lloyds could survive if economic conditions take a turn for the worse.
Lloyds is believed to have submitted a plan to the Treasury in the last few days that would involve it raising capital from investors in a rights issue that some expect to be as large as £10bn.
The Treasury is understood to have called in the FSA to investigate the proposals, and is also said to have sounded out the Bank of England.
The FSA has carried out stress tests of “systemically” important banks in recent months, to decide whether they are solid enough to withstand the recession.
Lloyds is also thought to have suggested ditching assets, including its pensions and investments arm Scottish Widows and Clerical Medical, as it fights to raise cash.
This would allow it to reduce its need for involvement in the government’s toxic asset insurance scheme.