Britain will take a stake of up to 75 percent in Lloyds Banking Group
Lloyds declined to comment and the Treasury could not immediately be reached for comment.
Lloyds would follow Royal Bank of Scotland
It has been locked in talks with the Treasury for more than a week.
A delay to the deal raised concerns talks had run into trouble. Lloyds said the delay was due to the complexity of the talks.
Britain's business secretary, Peter Mandelson, said earlier on Friday that talks over Lloyds' participation in the scheme, which would give the bank some protection against further losses on its risky credit-related assets, were difficult.
Obviously, when you're making a change like this, introducing new measures or instruments to enable the banks to recover, it involves a negotiation about the terms, the pricing and all sorts of conditions that are attached and that involves a fairly difficult, tough negotiation between the government and the banks, he told Sky News.
We want to make sure there are real results, real improvements that people can feel around the country. We are not prepared to sign up to anything unless we can be sure that there really will be benefits and gains for the country as a whole.
Analysts had expected Lloyds to put about 250 billion pounds of its riskiest assets in the insurance scheme.
The government has insured 325 billion pounds of assets owned by RBS, which could lift the state's 70 percent stake up to as much as 95 percent.
(Reporting by Steve Slater and Myles Neligan; Editing by Dan Lalor, Leslie Gevirtz)