Lloyds Banking Group will start meeting investors Monday to garner support for its plan to insure 260 billion pounds of risky assets with the government.

The deal, announced Saturday, will give the government a stake of up to 77 percent in the bank.

Lloyds will give the government 15.6 billion pounds in non-voting 'B' shares in return for state-funded insurance against further losses on the assets.

The bank will also be responsible for the first 25 billion pounds of any losses, with the state bearing 90 percent of any subsequent loss.

Lloyds followed Royal Bank of Scotland in putting billions of pounds of risky assets into the asset protection scheme as policymakers give unprecedented support to try to get lending flowing again and restore confidence in the battered banking sector.

The plan will limit losses banks could suffer if the economy continues to deteriorate and more loans sour.

It will massively reduce the risks Lloyds carries on its books and lift the bank's core tier 1 capital ratio to 14.5 percent from 6.4 percent, which will be welcomed by investors.

But shareholdings will be further diluted, with the government's stake in Lloyds rising to 65 percent from 43 percent if shareholders do not take up an offer to buy 4 billion pounds of shares currently held by the government.

Britain's holding could rise to 77 percent if the 'B' shares are converted to ordinary shares.

Lloyds chairman Victor Blank and chief executive Eric Daniels were expected to come under pressure for pushing through the takeover of HBOS, which made a near 11 billion pound loss last year and accounts for 83 percent of the risky assets being put in the government scheme.

Daniels told Reuters Saturday there had been no sign from investors they would object to the plan.

Many investors had already been angered at the deal, however, and the UK Shareholders' Association, which represents private investors, said shareholders were incandescent about what has happened, the Sunday Times reported.

Under the deal, Lloyds pledged to increase lending to homeowners and businesses by 28 billion pounds over the next two years. Attention will also focus on rival Barclays, whose talks with the Treasury will intensify this week about whether it will put assets into the protection scheme.

(Reporting by Steve Slater and Myles Neligan; Editing by Dan Lalor)

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