Could the banks’ eagerness to raise capital ultimately damage their balance sheets? By jumping to the front of the rights issue queue they risk preventing their clients from raising the cash and capital that will allow them to service their loans - resulting in further write downs.

The banks are raising more than £16bn through rights issues - three-quarters of that for the Royal Bank of Scotland. That has vastly depleted the reserves fund managers have available for subscribing for new equity.
But by botching the funding - Bradford & Bingley has had to withdraw and reprice its issue while HBoS’s new shares risk being left with its underwriters - rights issues are no longer seen as an orderly way to raise capital.

If underwriters end up with the £4bn HBoS issue it will be the equivalent of them holding a significant FTSE 100 company - but one which they are itching to dump at the minimum loss.

By the time other companies want to raise equity - housebuilders and retailers, for example - investors may have no appetite for subscribing. That may force them into debt-for-equity swaps that leave the banks holding shares in businesses they do not want - or insolvencies that leave the lenders holding nothing.

Even the big discounts at which the banks’ issues were priced has not ensured success: ordinary companies seeking to issue shares at a conventional discount do not stand a chance.

So the banks’ impatience in raising capital to shore up their own balance sheets is at the expense of their own customers. But when those customers default, the banks will lose all that they have raised.

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