LONDON (AP) — Lloyds Banking Group PLC confirmed yesterday that it was in advanced negotiations with the government to raise new capital to avoid making taxpayers the majority owner of the bank.

Published reports have suggested the bank will seek to raise £25 billion ($41 billion), including a share issue of up to £15 billion.

The Financial Times reported that Treasury chief Alistair Darling is prepared to allow Lloyds to test the market, but has reserved the right to withdraw permission to go to the markets for more capital. The newspaper did not identify the source of its report.

Shares in Lloyds, the nation's largest retail bank, were up 7.5 percent at 86.04 pence on the London Stock Exchange.

Lloyds said in a statement that it is considering raising capital through a rights issue and/or through the exchange of securities. It added that they would be fully underwritten and be subject to shareholder approval.

Lloyds, formed in January from the hastily arranged merger of Lloyds TSB and Halifax/Bank of Scotland, previously had signed up for the Government Asset Protection Scheme but has yet to agree terms with the government.

The merged company is the largest retail bank in the UK.

Joining the programme, which offers insurance on risky assets such as mortgage-based securities that have become difficult to sell, was expected to raise the government's stake in the bank from the current 43.4 percent to a majority position.

A large proportion of Lloyds' shaky assets were inherited from Halifax, the nation's No. 1 mortgage lender. The company booked impairment charges of 13.4 billion pounds in the first half.

Lloyds is also negotiating with the European Commission for approval of its restructuring plan.

The bank said it was confident that the final terms of the restructuring plan, including any sale of assets, would have no material impact on the group.

Lloyds has made several small divestments this month. On Monday, it announced the sale of Lloyd's Employee Equity Solutions to Computershare, based in Bristol, England, for up to £40 million ($65 million).