The enormity of Lloyds’ ill-fated takeover of HBOS will be exposed today as its board considers a Treasury rescue plan that could mean the taxpayer takes an economic stake of about 70% in the merged bank.

Alistair Darling, chancellor, has agreed an outline deal that would see the government insure toxic assets of £258bn, but it would come at a heavy price.

Darling’s officials have peered into the HBOS loan book and concluded that the final insurance fee charged by the taxpayer must reflect the high-risk nature of many of its investments.

Financial Times