RBS Says U.K. to Buy Majority Stake

Last week, shareholders approved the capital raising plan though it was clear that ordinary investors would be unlikely to buy the new shares because they were selling for 65.5 pence -- around 28% more than the existing share price.

RBS shares were above 380 pence last December, and above 200 pence as recently as Sept. 26.

The bank is expected to buy the preference shares back from the government as soon as possible because it will be forbidden from paying any dividends to ordinary shareholders while the preference shares are outstanding.

The drastic fundraising plan comes on top of a 12 billion pounds rights issue by RBS earlier this year -- at the time the biggest ever rights issue in Europe.

RBS has been one of the hardest hit European banks in the financial crisis because of its large exposure to subprime loans and its expensive purchase of ABN Amro bank just before the credit crunch.