Royal Bank of Scotland (RBS) has taken steps to further boost its capital strength by offering to buy back or exchange up to £15 billion worth of debts, according to newspaper reports.
The announcement by RBS and will allow its investors to exchange their junior bonds for cash or higher-rated senior bonds, and comes just a few days after Lloyds Banking Group announced a near identical exchange offer.
The swap move aims to improve the quality of the bank’s balance sheet and strengthen its crucial core tier 1 ratio - the main measure of capital strength made up of shareholders' funds and retained earnings. RBS's core tier 1 ratio is currently 7.0
An RBS spokeswoman commented: "We aren't aware what investor appetite will be. It is an offer to exchange so until such time as the offer closes we don't know what the impact will be."
In addition to other capital raising initiatives, both RBS and Lloyds Banking Group have taken part in the Government's Asset Protection Scheme which, in turn, has increased the Government shareholding in both banks .
RBS To Bolster Capital Strength With Debt Swap
Fri, 27 Mar 2009
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