Standard Chartered announces £3.3 billion rights issue

Standard Chartered, the UK-based banking operation with major exposure to the Far East, has today announced a £3.3 billion rights issue which will boost the company's core tier 1 capital ratio. This is the measure of financial strength in the worldwide banking sector and the additional funding is required to comply with forthcoming Basel III rule changes on capital adequacy. This comes despite the fact that banks officially have until 2019 to comply with the new regulations.

It seems that Standard Chartered believes that regulators around the world will push for early compliance with the Basel III recommendations. Whether this is the case not remains to be seen but additional capital for the likes of Standard Chartered at this point of the economic cycle will do no harm. It will be interesting to see whether other UK banks follow suit because this could cause short-term weakness in the banking sector and will test the resolve of investors to part with their money.

While there has been some talk of fundraising in the banking sector over the past few months the £3.3 billion cash call from Standard Chartered did catch some people by surprise but in hindsight maybe we should have expected this?