RBS shareholders will vote on the possibility of a government bail-out later today.
The bank has been in trouble since last year’s acquisition of Dutch bank ABN Amro which stretched its finances.
The £20 billion plan is to be the rescue solution for one of the banks that has been the worst hit during the current economic crisis. If it goes ahead, 60% of the company will be owned by the government.
RBS will be offering £15 billion in ordinary shares. As they are trading below the offer price of 65.5p, investments are unlikely to be made. The government has promised to buy any remaining shares.
An additional £5 billion of preference shares will be directly sold to the government with the plan of RBS being able to buy them back over time.
While the preference shares are outstanding, no dividends can be paid to shareholders of ordinary shares.
In the first six months of this year, RBS wrote off £5.9 billion in credit crunch losses and is likely to be facing the first full-year loss in its history as a public company.
As a result of the crisis, chief executive Sir Fred Goodwin has agreed to leave his position and is to be replaced by Stephen Hester, chief executive of British Land PLC.
Mr. Hester will “review its cost base in light of the slowing market” and 3,000 jobs are expected to be lost as a result.