In a brief statement on Friday, the part-nationalized lender British lender Lloyds Banking Group PLC said that it was in talks with the regulators about downsizing its participation in the state-run insurance plan, the Government Asset Protection Scheme, to insure it against credit losses.

With economic conditions showing signs of improvement, Lloyds also intends discussing the possibility of slashing the number of toxic assets might place in the scheme, which essentially pertains to securities that have become untradeable since the onset of the financial downturn.

In March, the '43.4 percent state-owned' Lloyds had announced that it would likely place 260 billion pounds of the risky, untradeable assets in the program; a move whereby the government's stake in the bank would have risen to 65 percent.

However, of late, Lloyds has reportedly been seeking "possible alternatives" to entering the scheme, and is even looking to avoid putting any assets into the program; but, it has failed to convince regulators about its recent change of mind.

As per the Financial Times, Lloyds intends raising 15-20 billion pounds through a rights issue and asset sales, to avoid joining the scheme.

Though Lloyds has stated that "all possibilities remain open," Reuters' Thursday report said that the Financial Services Authority had set extremely tough capital conditions on Lloyd's prospective departure from the scheme; hence making its departure fairly difficult.