RBS £12bn fundraising put to the vote

Sir Fred Goodwin today asked shareholders in Royal Bank of Scotland to support the biggest rights issue in corporate history.

The chief executive of the Edinburgh-based bank was joined by members of the board at an emergency meeting called to ratify a £12bn cash call on investors.

The rights issue is intended to bolster the bank's regulatory capital ratios and has put pressure on rivals such as Barclays to do more to build the capital cushions designed to protect customers from the possible collapse of a bank.

The RBS fundraising follows the record-breaking takeover of Dutch bank ABN Amro last year which left it with thin capital ratios at a time when international banking regulators were looking for fatter capital bases.

The ground-breaking move has allowed HBOS to ask its shareholders to support a £4bn fundraising and left Barclays, which is due to update the City on first-quarter trading tomorrow, facing questions about its capital strength.

It also comes as Barclays, which had originally agreed to take over ABN Amro, prepares to poach up to 40 key bankers from the RBS-owned Dutch bank. Five key officials have already been hired as managing directors and it is thought their teams are preparing to make the jump to Barclays Capital, the investment banking arm of Barclays, in what would be one of the biggest poaching exercises ever witnessed in the City.

The RBS rights issue would be launched in June, provided shareholders.....continued below

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support the cash call today. It has left Goodwin and the RBS chairman Sir Tom McKillop facing questions about their leadership of the bank after what is regarded as change in strategy. McKillop tried to explain the changed view to shareholders today. He said: "In summary, our view is that the world has changed. The further deterioration we have seen in credit markets this year; the examples of quite extreme stress we have seen in some of our financial counterparties; the worsening of the economic outlook – all these factors have brought us to the conclusion that we needed to carry more capital in our business than we have chosen to do in recent years, when the economic environment was more stable."

The bank has always operated on thinner capital ratios than any of its rivals but is now setting the bar at a core Tier 1 capital ratio - closely watched by regulators - at 6%. HBOS intends to match this but Barclays' target is 5.25% - something analysts are convinced is going to have to be raised.

McKillop said today: "I am conscious that in raising our capital targets we are asking our shareholders to make a very significant commitment in support of that strategy, and we are grateful for your support. It is incumbent upon me and upon the executive team to deliver, and that is what we intend to do. I believe we have the franchises, the products and the people to make it happen."

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