RBS rights issue 95 pc subscribed

That leaves the underwriters with an overhang of just under 5 percent of the shares on offer in the 12 billion pound ($23.7 billion) issue. In a rights issue, a company raises fresh capital by creating and selling new shares to existing shareholders.

RBS, the first British bank to announce a rights issue after being hit by the global credit squeeze, said that shareholders bought 11.6 billion pounds ($22.9 billion) of stock at 200 pence ($3.95) per share.

Banking stocks initially rose after the RBS announcement, but then fell on fears that a less than full subscription could indicate other banks may struggle to raise capital.

Rival HBOS, the parent company of mortgage lender Halifax, has planned a 4 billion pound ($7.9 billion) rights issue.

While RBS is dominated by big institutional shareholders who are usually supportive of such measures, HBOS has the biggest non-institutional shareholder base in Britain. Analysts believe that could work against attempts to sell more shares.

The increasingly turbulent banking sector has already been spooked by the announcement last week that Bradford & Bingley PLC, Britain's largest mortgage lender to landlords, was heavily discounting its own 300 million pound ($593 million) cash call after its shares slumped.

Bradford & Bingley dropped the size of the rights issue to 258 million pounds ($510 million) and cut the price to 55 pence ($1.09) per share from 82 pence ($1.62) per share as it also revealed that it would sell a 23 percent stake to U.S. private equity firm TPG Capital.

Bradford & Bingley will seek approval from shareholders for the revised rights issue at an extraordinary general meeting later this month.

Analysts say HSBC Holdings, Britain's largest bank, and Barclays, its third largest, could be next on the roster of rights issues.