Lloyds Shares Up, Asset Protection Talks Continue

Lloyds shares were up 4.7 percent at 42.2 pence by 0900 GMT, making them the third-biggest riser in the FTSE 100 share index.

Shares in Lloyds Banking Group rose on Friday as the lender remained locked in talks with the British government over its participation in a state-funded toxic asset insurance scheme.

Lloyds shares were up 4.7 percent at 42.2 pence by 0900 GMT, making them the third-biggest riser in the FTSE 100 share index , which was 0.5 percent higher.

Britain's business secretary, Peter Mandelson, said talks over Lloyds' participation in the scheme, which would give the bank some protection against further losses on its risky credit-related assets, were difficult.

"Obviously when you're making a change like this, introducing new measures or instruments to enable the banks to to recover, it involves a negotiation about the terms, the pricing and all sorts of conditions that are attached and that involves a fairly difficult, tough negotiation between the government and the banks," he told Sky News on Friday.

"We want to make sure there are real results, real improvements that people can feel around the country. We are not prepared to sign up to anything unless we can be sure that there really will be benefits and gains for the country as a whole."

The government has proposed a plan under which it would raise its stake in Lloyds to 70 percent in return for insuring 258 billion pounds ($367 billion) of the bank's toxic assets, the Financial Times reported.

An agreement could come before the weekend, with analysts expecting the bank to place about 250 billion pounds of its riskiest assets in the insurance scheme.

Late on Thursday, a Lloyds spokesman said the two sides still needed to work through "a good deal of detail" before a deal was reached.

The government has already insured 325 billion pounds of assets owned by Royal Bank of Scotland, 70 percent-owned by Britain, which also owns a 43 percent stake in Lloyds after providing the bank with 17 billion pounds of emergency support in October.