Rumours are rife in the City that Royal Bank of Scotland will ask shareholders to stump up to £10 billion in order that they can restore their capital ratios near to those of their European counterparts. Despite commenting that no funding raising would be required only two months ago, it seems that the Bank has had a change of heart. But is it all bad news?

Despite the doom and gloom headlines which will no doubt hit the press tomorrow, there is actually a sense of relief that finally we have a major UK bank willing to stand up and say that help is required. There are also many people who believe that the expected call for cash, which has not officially been confirmed, will mark the bottom of the credit crunch crisis (although the situation is unlikely to actually improve for some time).

The possible reason the news has leaked into the market is the fact that prior to announcing the rights issue, they will have held urgent talks with major shareholders and advisers, some of whom may have inadvertently leaked the information to third parties. Now that the Royal Bank of Scotland seem set to show their hand there are rumours that Barclays Bank are also in talks about a possible rights issue next week – perhaps looking to take the shine of the Royal Bank of Scotland announcement and beat them to the punch.

However, while strangely enough this may mark the bottom of the downturn if, as expected, more UK banks use this break in silence to ask shareholders for more money, there may be competition for institutional funds. While no bank would want to “give away” new shares, they will have to be priced at a level which makes them attractive to large and small shareholders alike. It would take a brave investor to underwrite an issue in such difficult markets, so that traditional backdrop may not be there for some banks.

The UK banking sector is very much at a cross roads after years of expanding overseas with many now hit by the credit crunch and their over weight exposure to markets such as the US. While this will not stop further expansion in the future it is sure to make a number of high flying chief executives think a little longer and a little harder before spending shareholder billions in overseas ventures.

If this is the bottom of the UK banking crisis then the UK tax payer may actually see a swift return on the money used to bail out the Northern Rock. It is no secret that the business of the Northern Rock is being reduced in order to get their house back into order ahead of a trade sale some time over the next few years.

We may well look back on this day in the months ahead and realise that it was the turning point in the cycle, but then again who knows what shocks and surprises await us in the future!