London - The British government announced on Saturday it was taking a 65 per cent controlling stake in the troubled Lloyds Banking Group, up from its previous 43 per cent. Lloyds ran into difficulties after taking over HBOS last year, with the government's backing. HBOS recently reported an annual loss of nearly 11 billion pounds (15.5 billion dollars) for 2008.
The taxpayer will now insure Lloyds' toxic loans for up to 260 billion pounds, while in return the bank will be forced to lend 28 billion pounds to firms and mortgage-buyers over the next two years.
Treasury minister, Stephen Timms, told the BBC the government would use its increased voting rights to ensure Lloyds lent 11 billion pounds to companies this year, and 3 billion for mortgages, with similar amounts next year.
Credit has virtually frozen up in Britain, adding to the country's economic woes.
Lloyds made a slim 807 million pound profit last year, a drop of 80 per cent on 2007, but has been hobbled by the 10.8 billion pound losses incurred by HBOS - which it took over in January.
That deal - which would ordinarily have fallen foul of competition rules - was personally approved by Prime Minister Gordon Brown.
Saturday's announcement bring the government non-voting shareholding to 77 per cent of Lloyds. It owns 65 per cent of voting shares.
The government will receive a fee of 15.6 billion pounds for insuring Lloyd's potentially bad assets up to 260 billion pounds.
Under that insurance scheme, Lloyds will pay up on the first 25 billion of toxic loands before the government steps in to cover the rest.
