Britain to take 65 percent stake in Lloyds Banking Group

LONDON: The British government said on Saturday it will up its stake in Lloyds Banking Group to 65 per cent and guarantee 260 billion pounds (290 billion euros, 365 billion dollars) worth of its toxic assets.

The state will increase its ownership of the bank from 43 per cent to 65 per cent.

"It's a very important announcement. It provides new certainty for Lloyds enabling it to commit new lending into the economy," Treasury minister Stephen Timms told a news channel.

"Lloyds will bare the initial loss on the assets being insured up to 25 billion pounds. It will pay a commercial fee of 16 billion pounds for participating in the scheme."

Lloyds Banking Group, formed from the merger of the Lloyds TSB and HBOS banks, has also pledged to lend a further 28 billion pounds over the next two years as part of the package.

George Osborne, finance spokesman for the main opposition Conservative Party, said the package showed that previous government measures to prop up the banking system had not worked.

"This massive second bail-out is proof that (Prime Minister) Gordon Brown's first bail-out failed, and the real test of it will be if credit starts flowing again in our economy," he said.

"It is also clear that the takeover of HBOS, which the prime minister helped orchestrate, is responsible for dragging Lloyds into majority public ownership."