The Royal Bank of Scotland (RBS) is to become the first of Britain's leading banks to turn to shareholders to shore up stretched finances by launching a rights issue worth up to 10 billion pounds (20 billion dollars), reports said Friday, according to dpa. RBS, Britain's second-largest bank, is expected to make the move early next week. While not confirming details, the bank said it would give a trading update ahead of its annual shareholders' meeting next Wednesday. Analysts said Friday that other British banks were likely to follow suit, after having been encouraged by the Bank of England to take independent measures to improve their cash flow in the wake of the credit crunch. "It's the quid pro quo for the Bank of England's new scheme to pump money into the banking system," the BBC's business editor Robert Preston said. Earlier this week, the heads of Britain's leading banks, including RBS, discussed the continuing effects of the credit crunch at a meeting with Prime Minister Gordon Brown. However, commentators pointed out that RBS was in a special position, after spending 56 billion pounds on the acquisition of Dutch bank ABN Amro last year in a record-breaking takeover deal. "RBS went into the credit crunch weaker than others," said one analyst, adding that the bank's move had been "one of the most anticipated rights issues." RBS, which has recently expanded into China, and which owns Britain's NatWest bank as well as Ulster Bank of Northern Ireland, had overstretched its resources and was now aiming to repair its balance. "Essentially it's positive and it is all about sharing pain - shareholders have got to accept that any losses arising from the credit crunch accrue to banks and not to the taxpayer," said Vincent Cable, the treasury spokesman of the Liberal Democratic Party. "It's positive and it's necessary and it's got to happen for all of the big banks," he said. One City analyst predicted a "stampede" on shareholders who might, however, not be too pleased at being offered to buy new shares at discount prices. Analysts said the RBS move could place further pressure on group chief executive Fred Goodwin, who had previously insisted that the bank would not tap shareholders for more cash as a result of the ABN Amro deal. The expected move was likely to be seen as "prudent rather than desperate" and did not mean that RBS was running out of cash. Owing to its takeover of ABN Amro, RBS had the "smallest cushion relative to risk on their balance sheet of any bank in Europe," said banking analyst Alex Potter, a situation the bank hoped to correct with the impending move.
