One source said the settlement, which will be the seventh joint UK and U.S. penalty in this inquiry, could be in the ballpark of 200 million to 300 million pounds.

Deutsche Bank is expected to be the eighth bank to settle U.S. and UK allegations of manipulating benchmark interest rates, which are used to price around 450 trillion dollars of financial products worldwide.

Britain's Financial Conduct Authority said in 2012 it expected to reach eight "global" U.S.-UK settlements with financial institutions over the rate-rigging allegations, although it has not ruled out the possibility of pursuing more institutions alone.

Including fines dished out by the antitrust regulator, the European Commission, on cartel grounds, a total of 10 banks and brokerages have been fined around $6 billion for benchmark interest rate manipulation to date. Seventeen men have been criminally charged.

The Financial Times reported earlier on Thursday that Lloyds is expected to announce the settlement before declaring its first-half results, citing people familiar with the situation. (http://on.ft.com/1mK7C1q)

Lloyds, FCA, CFTC and DoJ could not immediately be reached for comment.

(Reporting by Aashika Jain in Bangalore, Kirstin Ridley and Matt Scuffham in London; editing by Gunna Dickson)

By Kirstin Ridley and Matt Scuffham