Page last updated at 18:47 GMT, Wednesday, 14 May 2008 19:47 UK

Shareholders back RBS cash plan

RBS sign
RBS needs to strengthen its balance sheet

Royal Bank of Scotland (RBS) shareholders have given their approval to the bank's request for an extra 12bn in capital.

RBS hopes the money raised by selling stock to its existing shareholders will help cover losses related to the global credit crunch.

RBS said that shareholders approved the rights issue - the biggest in British corporate history - by a 95% majority.

HBOS and Bradford & Bingley have also asked their investors for extra cash.

HBOS wants to raise 4bn, while B&B is planning to raise 300m.

As a result of the sub-prime crisis, banks have been reluctant to lend to each other and found it harder to raise capital.

RBS and other banks have also suffered from a drop in the value of risky assets, particularly those related to the US sub-prime market that lends to homebuyers with poor credit histories.

WHAT IS A RIGHTS ISSUE?
Companies issue extra shares to raise money
They are offered to existing shareholders, usually at a discount to the current share price
Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones

RBS chairman Tom McKillop said the bank appreciated shareholders' "overwhelming support".

"This new financial strategy, together with our enhanced geographical presence, customer franchises, product capabilities and distribution channels, positions RBS well for the future," he said.

RBS's circumstances have been exacerbated after its lead role in acquiring ABN Amro for 71bn euros last year.

There are about 200,000 RBS shareholders; 93% of the shares are held by major investors, such as pension funds, with the other 7% owned by private individuals.




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