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UK watchdogs said to decide on Lloyds’ capital raising plans over the weekend

Britain’s financial watchdogs will this weekend make up their minds about Lloyds Banking Group’s plans to raise private capital and escape further government control, a source close to the situation said.

The banking group has yet to receive official approval for a package of measures it has lined up to stay out of the Asset Protection Scheme, including a rights issue of more than £11 billion (US$17.87 billion), the source said.

“They have a group of underwriters [for a rights issue] and we know they’ve spoken to the market, but they haven’t got a green light from the government,” the source said.

Two sources familiar with the matter said Lloyds could announce its plans in the course of next week, depending on whether it received approval. The first source said Lloyds’ chances were “definitely 50-50.”

However, a government source dampened expectations of a rapid announcement, saying a decision was not “imminent,” meaning an announcement would not come tomorrow.

“There’s no decision on Lloyds asset protection scheme or rights issue being made this weekend,” the source said.

The first source, when confronted with that statement, maintained the regulators would need to inform Lloyds of their decision early next week and it was then up to the bank to proceed.

The UK government owns 43 percent of Lloyds since last year’s emergency bail-out and the bank signed up to insure £260 billion in the government-backed asset protection (APS) scheme to protect the bank’s assets against losses.

Lloyds repeated the comment it has made when asked about its plans.

“We have a number of options available to us. We continue to review them,” a spokesman said.

Signing up to the APS would be a costly matter for Lloyds and the talks between the Bank of England, the Financial Services Authority and the Treasury will centre on whether the three think it safe for Lloyds to stay out.

“From a financial stability point of view, is the tripartite happy to let them go their own way?” the first source asked. “People need to make that judgement this weekend.”
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