LLOYDS Banking Group&rsquo;s chief executive Eric Daniels and the Treasury were last night embroiled in an increasingly bitter dispute over the bank&rsquo;s bid to escape participation in chancellor Alistair Darling&rsquo;s Asset Protection Scheme (APS).<br /><br />The government wants Lloyds to pay a break fee of &pound;2bn to extricate itself, which the bank thinks is far too high. Instead, Lloyds has suggested that the Treasury use the $425m (&pound;267m) paid by Bank of America to leave a US asset guarantee scheme as a benchmark for the fee, City A.M. has learnt. <br /><br />But its pleadings have fallen on deaf ears. &ldquo;The two schemes are not comparable at all. Our schemes have always been much more comprehensive than those in the US and negotiated on commercial terms,&rdquo; a Treasury official told City A.M. &ldquo;We&rsquo;re not in the business of rescuing banks for their own sake,&rdquo; he added.<br /><br />Treasury mandarins said they had calculated the &pound;2bn figure based on a percentage of the &pound;15.6bn Lloyds would have paid for full use of the APS, pointing out that the bank&rsquo;s assets have already been implicitly insured during the six months since it announced participation. They have resolved that Lloyds either pay the full fee for leaving the APS or participate as originally planned.<br /><br />One senior Treasury figure said: &ldquo;It&rsquo;s clear that we would want it the fee and the European Commission would expect it, if Lloyds&rsquo; &lsquo;Plan B&rsquo; goes ahead.&rdquo;<br /><br />Daniels has been desperately fighting to keep the government&rsquo;s stake below 50 per cent and has put forward a plan which would see the bank exit the APS after raising around &pound;25bn through a combination of a cash call and asset disposals. <br /><br />Charles Stanley analyst Nic Clarke said having to pay a fee to exit the scheme could hinder the bank&rsquo;s efforts to launch a successful capital-raising initiative. <br /><br />&ldquo;It won&rsquo;t help them to market the rights issue if the break fee is too big,&rdquo; he said. &ldquo;The key thing will be whether Lloyds can get through the regulators&rsquo; stress tests, which are likely to be bullet proof. The regulators will not want any chance that the non-APS move will fail.&rdquo;<br /><br />Daniels had hoped to have settled the bank&rsquo;s position over the APS but has come up against numerous obstacles in his quest to exit the scheme.<br />