Top City practitioners and regulators have been summoned to the Treasury tomorrow to discuss reforming the rights issue process, in the wake of the chaos surrounding the recent cash calls undertaken by the UK's troubled banks.
The Treasury is determined to push for changes to the process, which became more controversial following the crisis cash calls launched by HBOS, RBS and Bradford & Bingley to shore up their balance sheets. If agreement can be reached with practitioners over the next few weeks, the Treasury hopes to put recommendations in place by the end of the summer.
One source said: "The Treasury is genuinely shocked by the disastrous way the recent rights issues by the banks were undertaken. It's bad for the companies in trouble but also bad for London as a financial centre. Officials understand that the system of raising money needs to be speeded up and improved."
Tom Scholar, managing director of the Treasury's financial services unit, and Kitty Ussher, Economic Secretary at No 11, are both involved in the planned reforms, which are likely to include speeding up the process and reducing requirements such as issuing a full prospectus.
This is the first meeting of the rights-issue working party, set up after the Treasury announced its review a few weeks ago. Bankers and investors will be at the meeting along with representatives from the Financial Services Authority and Bank of England. Any reforms will require new legislation.
One banker who will be at the meeting said: "This debate has been going on for decades. But for the first time there is a sense of urgency from all parties. It's no longer about paper-pushing. Everyone wants changes."
The UK is the only country to give investors pre-emption rights over shares, giving them first refusal on new shares in proportion to their existing holdings.
But the system has come under attack from big US investment banks such as Morgan Stanley and Goldman Sachs. They have argued that the UK should adopt their placement process, which is quicker; however, even they now accept the principle of pre-emption and are pushing only for the process to be made more efficient and faster.
"There is now a consensus. This is a great opportunity for reform," said another source.
The working party will consider removing the need for a full prospectus, tightening the timetable so that the period needed for an extraordinary general meeting can be shorter, and introducing a twin-track system for institutions and retail investors.
Paul Myners, a non-executive director of the Bank of England, who led a study of pre-emption rights three years ago, said that the Treasury only had to pull out his report to see what changes needed to be made. Mr Myners recommended a trading update be issued rather than a prospectus, and that EGM notice periods be cut to seven days. He said that nothing in his proposals threatened the interests of companies or their shareholders.Reuse content