Lloyds and FSA bicker over cash return plan

---

PART state-owned Lloyds Banking Group is embroiled in a dispute with Britain's financial watchdog over its plans to return cash to shareholders, the Sunday Times said.

The newspaper, without citing sources, said CEO Antonio Horta-Osorio wants to pay a small dividend in 2014 but the Financial Services Authority is threatening to block the move because it thinks the bank should preserve its capital to protect itself from the threat of a eurozone break up.

Lloyds, which is 40 percent owned by the UK taxpayer following a government bailout, is keen to resume dividend payments as soon as possible, but the move depends on how much capital UK banks will need to satisfy the European implementation of global Basel III rules.

"We have always said we would like to recommence progressive dividend payments, when the financial position of the group and market conditions permit, and after regulatory capital requirements are defined and prudently met. We work productively with all regulators in that respect," Lloyds said yesterday.

New global rules, known as Basel III, mean banks have to hold more capital in reserve to cover loans that could turn bad. The aim is to create a bigger safety net to protect taxpayers from having to bail out banks.

Resuming dividend payments would be seen as a significant milestone in Lloyds' recovery after Britain pumped in 20 billion pounds (US$32 billion) to rescue the bank in 2008, and a precursor to the eventual sale of the government's stake.

The Sunday Times said Lloyds began talks with the FSA about resuming dividend payments last month.

---