RBS claims shareholders knew it was weak when it raised £12bn

Tim Wallace
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THE WEAK capital position at RBS was well known to investors in 2008, the bank said yesterday, defending itself against claims from investors that it hid vital information.

The bank is fighting legal action over its £12bn rights issue in April 2008. Investors lost out when the bank failed months later.

In legal filings seen by City A.M. the bailed-out bank argues it did not need to give more detail about its capital position – its core tier one capital ratio was below four per cent, a long way from its target of above five per cent – because shareholders already knew the position was poor.

It planned to increase the ratio over the next two years, and was urged in February 2008 by the Financial Services Authority to accelerate that process. But the bank stressed the watchdog did not tell it to raise more funds, insisting the rights issue was the bank’s own plan and it proposed the fundraising to the FSA – counter to a key claim in the legal row.

RBS also said its position was relatively strong after the rights issue and it only got into difficulty because of Lehmans’ collapse later that year.

“In the period following the rights issue and up to immediately prior to the Lehman Brothers’ collapse, RBS was able not only to meet its short-term wholesale funding needs but also issue longer-term debt,” it said.