British government takes controlling stake in Lloyds Banking Group

The British government has become the majority shareholder in Lloyds Banking Group PLC in exchange for insuring more than $472 billion in risky loans.

Saturday's announcement means the government's stake in Britain's third-largest bank will surge from 43.5 per cent to at least 65 per cent and possibly as high as 77 per cent.

Treasury Minister Stephen Timms, of the governing Labour Party, said the move will allow the bank to make more credit available to borrowers.

"There is uncertainty about the ultimate cost, but I think what we can be confident about is that through participating in this scheme, through being able to make available additional lending, we're contributing to ensuring that the downturn is as short and as shallow as it possibly can be," he said.

In return for the money, Lloyds has committed to increase lending, primarily to businesses, by $50 billion over the next two years.

Lloyds chief executive Eric Daniels said the arrangement "will ensure the group can weather the severest of economic downturns and emerge strongly when the economy recovers."

With files from the Associated Press