By David Enrich 

LONDON-- Lloyds Banking Group PLC is in "late-stage settlement discussions" with authorities over its alleged attempts to manipulate benchmark interest rates, the U.K. lender said Friday.

The settlement with U.S. and British authorities, expected next week, is likely to involve Lloyds paying up to several hundred million dollars in penalties, according to a person familiar with the matter.

Lloyds, which is 25%-owned by the British government after a taxpayer bailout, will become the seventh financial institution to settle the long-running U.S. and British probes into attempted rigging of the London interbank offered rate, or Libor, and other benchmark interest rates. In addition to Lloyds, three of those institutions-- Barclays PLC, Royal Bank of Scotland Group PLC and ICAP PLC--are British.

The investigation into the alleged attempts by Lloyds employees to manipulate Libor has been going on for years, according to people familiar with the matter. The Wall Street Journal reported last week that talks had recently accelerated and were expected to yield a settlement in coming weeks.

Lloyds has said it is cooperating with investigators. It isn't clear how big a role the bank played in the Libor scandal. Executives privately have said that their bank's role was relatively minor, limited to a small number of employees.

Part of the settlement is likely to focus on attempts by Lloyds traders to manipulate the Japanese yen variety of Libor. British fraud prosecutors previously have listed Lloyds as one of the banks whose traders allegedly worked, directly or indirectly, with former UBS AG and Citigroup Inc. trader Tom Hayes to manipulate yen Libor. Mr. Hayes has pleaded not guilty to U.K. fraud charges.

Write to David Enrich at david.enrich@wsj.com

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