LLOYDS Banking Group is thought to be considering a plan to improve its finances by swapping illiquid assets on its balance sheet for more marketable bonds held by its Edinburgh-based life insurance arm Scottish Widows, reports said.
The 40% state-owned bank is thought to be seeking approval from the Financial Services Authority to swap £1 billion of assets with Widows.
Under a liquidity swap an insurer or other institution will lend a bank a portfolio of gilts or other easily saleable bonds for up to ten years. The loan of these securities is secured against collateral such as mortgage-backed bonds.
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