Lloyds Banking Group today admitted it has so far failed to agree terms with the Government to place £250 million of assets into the Government's toxic debt insurance scheme despite hopes of securing a deal by this morning, reports The Times .
Shares in Lloyds fell 15.8 per cent in early morning trade, losing 11.9p to 63.1p, as it also revealed that losses at HBOS, the stricken lender it acquired in January, reached £10.8 billion for 2008. Over the same period, Lloyds' profits plunged by 80 per cent to £807 million.
The combined group, which is 43 per cent owned by the taxpayer, said this morning that discussions with the Treasury "about participating in the Asset Protection Scheme are progressing and are well advanced."
However, a failure to agree terms in time for the bank's results will come as a blow to Lloyds, which had hoped to finalise a deal by this morning.
Banking sources had said last night that Lloyds and the Treasury could not agree on fees for the insurance scheme.
An embarrassing public row broke out last night between City minister Lord Myners and Sir Fred Goodwin over the former Royal Bank of Scotland chief executive's refusal to give up his £693,000 a year pension, according to The Guardian.
Goodwin insisted ministers had known of his £16m pension pot for months and accused Myners of threatening him with more bad publicity if he did not hand back some of the pension he was awarded when he left the loss-making bank last month.
"You highlighted that the absence of such a gesture would give rise to significant adverse media comment," Goodwin wrote in a defiant and combative letter to Myners which explicitly contradicts the government's insistence that it did not know the details of his payoff.
Just hours later Myners issued a letter telling Goodwin his refusal to reconsider was "unfortunate and unacceptable". He hoped "on reflection you will now share my clear view that the losses reported by the bank which you ran until October cannot justify such a huge reward".
The Governor of the Bank of England warned yesterday that more money might have to be pumped into the crisis-stricken banking sector, as the Government said it was insuring toxic loans worth more than £300bn for the Royal Bank of Scotland, The Independent reports.
Mervyn King also launched a thinly veiled attack on the Government's high levels of public debt ahead of the credit crunch and revealed that the Bank of England is poised to embark on quantitative easing. His comments will raise fears that the UK banking sector and wider economy faces a long and painful road to recovery and that further banking bailouts may be required.
Giving evidence before MPs on the House of Commons' Treasury Select Committee, Mr King said it was "impossible to say" how much capital may be required to prop up the fragile UK banking sector, as it was dependent on the state of the global economy. "How much capital banks will need in the end is impossible to tell," Mr King added.
Mr King said it could take "many months" to identify the scale of the toxic assets held by banks and that the Government and the regulator were unlikely to reach a definite conclusion because "it was a situation that was constantly moving". He added it was crucial to "find out what is really on the balance sheets of our major banks".IFAonline
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