Royal Bank of Scotland, Britain’s second largest bank, is to approach shareholders for nearly £10bn of extra cash for improving its financial position.
Royal Bank of Scotland (RBS) is looking to raise the money from its existing investors through probably the biggest ever rights issue in the country’s corporate history. The global credit crunch has forced banks worldwide to shore up their crumbling capital positions, and it is believed that others may well follow suit.
RBS, owner of NatWest, insurer Direct Line and Ulster Bank, has not commented. In a statement released, it has merely confirmed that it would provide a trading update, which is due ahead of its annual meeting next week. Analysts are certain that the bank will announce a big rights issue (a demand for new cash from the shareholders) next week. According to a BBC News report, RBS will also go for about £5bn of write-downs when it actually launches its rights issue.
The rights issue is considered to be a prudent measure for providing a capital cushion for the amount of risk on the bank’s balance sheet after it played a major role in last year’s takeover of ABN Amro, the Dutch bank.
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