LONDON: The Financial Services Authority watchdog concluded this week that the bank would have to significantly raise its core capital after carrying out the stress test, newspaper reports said.

The Times said Lloyds, which is 43-percent owned by the government after a massive bailout, was effectively barred from pulling out of the government's Asset Protection Scheme unless it raised the capital.

Such capital is a key measurement of a bank's financial strength.

LBG agreed in March to put 260 billion pounds of troubled loans into the scheme, but reports later said the bank was considering raising fresh capital by issuing new shares to reduce its reliance on the scheme.

The Financial Times said the bank, however, was not barred from leaving the scheme, but had now decided to participate because the required sum to meet its capital needs was more than Lloyds could raise in the markets.