Why is the rights issue taking place after RBS recently stated that there were no plans for inorganic capital raising?
RBS’s capital plan had assumed that it would maintain its Tier 1 capital ratio in the range 7% to 8% and that it would rebuild its core Tier 1 capital ratio towards 5% by 2010. At the time of its 2007 results announcement RBS confirmed that it was operating within the parameters of this plan. The balance of risks and opportunities inherent in this plan have been under continual review. However, in the light of developments during March including the severe and increasing deterioration in credit market conditions, the worsening economic outlook and the increased likelihood that credit markets could remain difficult for some time, the Board has concluded that it is now appropriate for RBS to accelerate its plans to increase its capital ratios and to move to a higher target range to reflect the generally weakened business environment. Reflecting these factors, the Board has raised its target range for the Group’s Tier 1 capital ratio to 7.5% to 8.5% and has set a target for the core Tier
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