The bailed-out Lloyds Banking Group is to take an unexpected £1bn accounting charge as the result of a complex scheme to buy back financial instruments it issued during the banking crisis.
The 33% taxpayer-owned bank unsettled retail investors last month when it said it might buy back the bonds at face value – even though they were trading at higher values – and is now agreeing to offer extra cash in return for investors selling the bonds back to the bank.
The bonds being bought back are known as enhanced capital notes – an instrument that is intended to "bail in", or impose losses, when a bank's capital ratio falls below 5%. About £8.4bn of them were issued in 33 tranches and are now owned by retail and institutional investors.
Institutional investors are being offered a new type of bond which bails in when the capital ratio falls through 7%.
A Lloyds spokesperson said: "This offer provides greater choice for investors, including the option of getting cash for their investment at around market price. It also ensures that the group's capital position is aligned with evolving regulatory requirements."
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