By Steve Slater
LONDON (Reuters) - Lloyds Banking Group <LLOY.L> said the terms of a British government-backed plan to insure its riskiest assets may change and it expected to make disposals to get clearance for the plan from the European Union.
The part-nationalised bank said on Wednesday it expects to sell or exit from certain parts of its business to win approval from European regulators for the insurance scheme.
Lloyds agreed in March to insure 260 billion pounds of risky assets under the government's asset protection scheme (APS), to shield the bank from massive losses if the recession deepens.
"Discussions and negotiations with HM Treasury to finalise the terms of the group's proposed participation are continuing and, although this is not currently expected by the board, may result in changes to the terms announced on 7 March," Lloyds said.
Lloyds said last month bad debts on corporate loans would be more than 50 percent higher in 2009 than last year and it expects to make a loss, which prompted fears it may have to pay more for the APS as the quality of its assets had worsened.
It expects to conclude details of the plan "over the next few months."
In a letter to shareholders relating to a 4 billion pound fundraising, Lloyds said the APS is subject to obtaining state aid clearance from the European Commission.
"The group expects to agree a forward plan involving the cessation or disposal of certain parts of the business," the bank said. It expects this to involve non-core businesses, but it could have to divest or exit core businesses, it said.
By 9:07 a.m. Lloyds shares were down 1.6 percent at 75.4 pence, compared with a closing price which was adjusted for the loss of rights to subscribe for discounted new shares in a rights issue.
(Editing by David Holmes)