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Royal Bank of Scotland considering a rights issue

The BBC has today reported that Royal Bank of Scotland is looking at the possibility of a £3 billion fund raising which would allow the company to pay the government in cash rather than shares with regards to its involvement in the asset protection scheme. This is a similar situation to Lloyds bank, where the directors of Lloyds are looking to raise outside money in order to reduce the UK government's stake in the operation and influence on its day-to-day running.

While the Royal Bank of Scotland move would appear to be at a very early stage, if the company was unable to raise new funds and issued shares in lieu of premiums to the UK government, the UK government shareholding in business would raise from 70% to 84.5%. There is also a feeling that behind the scenes the UK government would rather that the UK banking sector started to tap into private investors and institutional investors to try and get some normality back into the situation.

It will be interesting to see how the UK stock market responds to this particular rumour and what affect this may or may not have on the share price.

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