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RBS may announce rights issue to raise funds

With banks around the world striving to strengthen their financial position following the global credit crunch, the Royal Bank of Scotland has hinted at a possible rights issue to raise around GBP10 billion in cash to fortify its financial position.

RBS’s plan to raise the money through a rights issue, which will offer the bank’s shares to existing shareholders at a discount, encouraging them to purchase them, is claimed to be one of the biggest in corporate history according to the BBC.

The loss resulting out of the sub-prime mortgage meltdown has had leading American banks raising billions of dollars through shareholders, but British banks have been reluctant to ask shareholders for more funding because of the stigma attached to the issue, reported Times Online.

It is reported that the Financial Services Authority is also involved in discussions with RBS over the rights issue and the Treasury has also been informed about the situation.

Following reports about RBS’s planned rights issue, the bank’s shares showed an increase of 4%. RBS has been attempting to maintain its position despite the credit meltdown odds. However, it reduced around 200 jobs in its global banking and markets business to save on operational overheads.