RBS: the Rights math

Now that RBS is finally bowing to the inevitable and shaping up for a rights issue, how much does it need to raise? There’s widespread agreement that RBS’s capital is too low. But disagreements set in over how low. One yardstick of capital adequacy is the relationship between a bank’s tier one capital and its risk-weighted assets. For RBS, that ratio is 7.3%. But tier one capital includes some types of debt like preference shares. Strip that out, and the core equity tier one ratio is only 4.5% -...