According to a report in the Sunday Times, the bank is looking to raise up to $24.9 billion by offering new shares on the stock market.
Chief executive Eric Daniels is said to think that the fees associated with the government scheme - which total $26 billion - are too high.
"We are working with the Treasury to finalize the detailed terms of our intended participation in the asset protection scheme," a Lloyds spokesperson stated, adding that it will agree terms that are "in the best interests of our shareholders".
Lloyds - which is 43 per cent owned by the taxpayer - revealed a first-half loss of $6.76 billion last week.
It cited bad debts associated with the purchase of HBOS as a reason for the poor performance.