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RBS 'prepares fundraising plan' RBS 'prepares fundraising plan'
(30 minutes later)
Britain's second largest bank, Royal Bank of Scotland, is expected to ask shareholders for up to £12bn of extra cash to improve its financial position.Britain's second largest bank, Royal Bank of Scotland, is expected to ask shareholders for up to £12bn of extra cash to improve its financial position.
It is thought RBS will try to raise the funds by selling shares to existing investors through a rights issue. Several newspapers are reporting that RBS will raise the funds by selling shares to existing investors.
Because of the global credit crunch, banks worldwide are keen to shore up their capital positions - and it is thought others may follow RBS's move. The global credit crunch has meant banks worldwide are keen to shore up their capital positions - and it is thought others may follow RBS's move.
RBS, owner of NatWest, Ulster Bank and insurer Direct Line, has not commented.RBS, owner of NatWest, Ulster Bank and insurer Direct Line, has not commented.
RBS said it would give a trading update next week as planned. In a statement, it would only confirm that it would give a trading update next week as planned.
In the last few weeks central banks, governments and regulators have been telling banks they need to strengthen their balance sheets. The update is due ahead of its annual meeting on Wednesday.
If they do so, the Bank of England will start accepting UK mortgage-backed securities in return for government bonds - a move designed to get banks lending to each other again. Takeover move
This is vital for mortgage lenders to reduce their rates on mortgages and revive the housing market, which is looking increasingly gloomy. RBS shares fell 2.4% in late trading on Thursday as rumours of a rights issue began to circulate.
Analysts say that while a rights issue will most likely be seen as a prudent, rather than desperate, move by RBS, it will also represent a u-turn for the bank's chief executive, Sir Fred Goodwin, who had previously insisted the bank did not need to tap shareholders for more cash. Cash reserves at RBS were stretched by its leading role in last year's £57bn takeover of the Dutch bank ABN Amro.
But RBS is unlikely to be the only bank considering going to the market for extra capital.
Bradford and Bingley denied widespread reports at the weekend that it was planning to raise money in the same way.
Heads of many of Britain's biggest banks, including RBS, had a meeting at Downing Street on Tuesday to discuss the continuing effects of the credit crisis.
The Bank of England is considering a plan to start accepting UK mortgage-backed securities in return for government bonds in an attempt to get banks lending to each other again, which in turn should ease up lending to individual borrowers.
Analysts say that while a rights issue is most likely to be seen as a prudent, rather than desperate, move by RBS, it will also represent a U-turn for the bank's chief executive, Sir Fred Goodwin, who had previously insisted the bank did not need to tap shareholders for more cash.