Sky News business editor Michael Wilson

Who’s next? Now that RBS are getting ready to tap their shareholders for £10bn, the inevitable rumours are in flight. Twenty minutes after the market opened,the mutter was that Barclays will do the same for between £5 to £10bn, on Monday. They have since said that there is ‘no change in their policy towards their capital position’.

Behind the rumours are some hard facts about rights issues, which are ‘invitations’ for existing existing shareholders to buy additional shares in the company in proportion to the number of shares they already own, and for a cheaper price.. When it’s a big one, like the RBS attempt to shore up its capital base, you can only do it once. And it has to work.

It’s also placing pressure on the other big banks, which undoubtedly have similar problems. Just like RBS, other banks have to keep a cushion of cash in proportion to the level of risk on their balance sheets, and we assume that the credit crunch will have eroded their balance sheets, but to a lesser degree. RBS is also still digesting the massive and ill-judged £49bn purchase of ABN Amro.

Now the news of the rights issue is on the table, the others won’t want to lag far behind, because all the banks have mostly the same shareholders, and the investors’ enthusiasm for the whole process may wane if it drags on.

It’s good to be the first to break the bad news,and tap the market quickly. There's now a race on for the money. That’s why there are rumours around that other big banks may follow suit.

You’ll remember that the Prime Minister called the lenders into Downing Street on Tuesday to discuss the credit crunch and the mortgage freeze. Perhaps RBS took his pleas for openness in return for Bank of England help to heart. Perhaps the others will follow.

And since RBS is such a large part of the FTSE 100, most people with a pension fund are probably invested in RBS and will have to bear the cost of this huge issue.

Comments

[John London 22 Apr 2008 15:15:32]

It would have been nice to think that before the government handed over the blank cheque that they:

Asked the banks st stop fleecing customers who go overdrawn by charging £35 for a letter. Whats the point in creating further bad debt by pushing people further under at this time.

Asked the directors that in a few months time there won't be headlines in the papers saying bank chief gets multi millon pound bonus for failure

Got greater transparency of bank charges and prudence.

The reality is that they know that they can still fleece the poorer knowing that if it turns into bad debt the taxpayer will foot the bill. They will know they can take even bigger risks in the future than have in the past.

[Bob Brisbane Australia 21 Apr 2008 13:30:17]

Re The 50billion help the banks will get, its about time the banks got a dose of thier own treatment, they have been ripping of thier customers for years ! not just in the UK , but here in Australia. I can bet you any money that the CEO's and desk jockeys will still get the big buck'back handers.we the public have to ware the cost of money, its about time the banks did the same Stuff the share holders! it Called risk! the tax payer should not bail them out. 50billion buys a lot of healthcare.and other neads of the not to well off people of the Uk.I 'am that labour has lost the plot. god help the country.the old labour cry was rule Britania . now its screw Britania

[Elizabeth Davies Cape Town 21 Apr 2008 11:04:17]

I told you the "fat banks" would be singing, the tune is 50 Billion, first chorus.

[Eddy in Hampshire 19 Apr 2008 08:58:34]

Responsible and non sensationalist reporting of the economic issues is what is required. Go on SKY dare to take the lead and start a campaign for your industry colleagues to follow...

[PURPS 18 Apr 2008 17:07:13]

Thus, is an excellent move and stops the Asian and Middle East Sovereign wealth funds coming in at very cheap levels and buying into UK banks.

I would like to see the two smaller Mortgage banks merge with Lloyds taking the combined banks.

Barclays should actually look to buy or merge with RBS at the current levels. Then go and Buy Bank of America.
It is a no brainer.

Lastly, the UK needs to establish a sovereign wealth fund and go cherry pick other US assets at the current prices and with sterling at USD 2

Buy bank shares, wear diamonds.

The only thing left to do is massive forex intervention as we saw with the Louvre accord; this would see commodities priced in US dollars come lower. China needs to re-value the Yuan and allow a 30% appreciation and the west should sell Euro and buy US$ to revalue to at least 20%

[Dennis, Cramlington Northumberland 18 Apr 2008 16:27:30]

I couldn't help noticing that Declan and Co on the BEEB this time dealt with this RBS matter by clearly stating that customers were not effected, and it was just a fund raising measure to help extend the capital available to cover risk. No panic. Just routine.

Swicth over to Sky, and almost immediately the front man on Sunrise is dealing with the same subject by calling it, a few times, 'emergency' funding....

Familiar?

Should be.

Northern Rock hysterical reporting once again. bring the buggers down.

Sometimes the reporting of the non-crisis creates the crisis.

Bank run anyone?

Lets rig the compensation terms of reference now, and save time, and money.

[Marian London 18 Apr 2008 15:51:26]

RBS is clearly distressed as a result of exposure and investments made within the subprime market. They are right to seek the assistance of Shareholders in the first instance before seeking external assistance. Whether the shareholders oblige is another matter because the bank has to account for how they exposed themselves so much and got into the mess.

As for customers, they will recall the times banks made huge profits and did not extend/transfer same to them, instead paid huge city bonuses for poor judgements, bad risks and decisions as well as 'misperceived' performance.

[Elizabeth Davies Cape Town 18 Apr 2008 13:58:39]

The credit crunch is not over until the "Fat Banks" sing.

[pete. brighton 18 Apr 2008 13:45:49]

Let me tell you... armageddon is not a nuclear war or extinction due to global warming or the like. It is the complete collapse of the banking and economic system. Driving millions into poverty. If you think that somehow you are disconnected from the turmoil then think again. If another bank goes down and there is a strong risk that it will then the domino effect will crush everything in its path. The housing market must be protected or panic will set in. Let me tell all the JOURNALISTS reading this that they are causing panic already AND CREATING A SPIRAL OF FEAR. Somebody needs to get a grip of all this NOW otherwise we are all in for a very desparate future. I do not have a very big voice so putting my views accross on here is about the best I can do. But PLEASE listen to me someone with power and authority to do something!

[Khalid 18 Apr 2008 13:05:41]

Sir
Thus far as all banks are concerned, the fault lies within the stance they adopt thus far as only seeing themselves as global enterprises with little or no respect for small fish as they more often refer to us mere mortals.
Today RBS, tomorrow Barclays, Abbey, and who knows who else.
Thus far as the matter of share purchase schemes are concerned, investors will invest and may be advised not to sell them for at least Three years so as to benefit from sales tax, but if you can last Five years, then their is no CGT to pay.
So, where was I? Oh yes, squashed by the arrogant stance by many a banker who wants to settle before the training papers are served.
The question arises, when I say [I Have A Dream] why do you destroy it, thinking you can get more from [Abba]?
CRM=Customer Relationship Management http://www.cmcltd.biz might assist. Typical bankers thoug, always thinking of money! Today is better than Monday!!!!!!