Bradford and Binglay is the latest British bank to bolster its balance sheet as it launched a £300m rights issue.

Hit by the turmoil in the capital markets and concerns about declining UK house prices, the mortgage lender is proposing to offer shareholders 16 new shares for every 25 shares they own, at a price of 82p each.

It said the issue - priced at a 36 per cent discount to the theoretical ex-rights price and a 48 per cent discount to the Bradford and Binglay’s closing price on Tuesday of 158¾p – would “strengthen the group’s capital position and mitigate the impact of the previously announced reductions in the value of certain of the group’s treasury investments.”

The move comes as the majority of the UK’s banks are under pressure to strengthen their balance sheets, which have been exposed as fragile after the lenders suffered losses on securities back by US mortgages. HBOS has announced plans to raise a £4bn rights issue while Royal Bank of Scotland is looking to raise £12bn.

The bank’s capital ratios are expected to come under scrutiny when the Barclay’s issues a trading update to investors on Thursday.

The proceeds of Bradford and Binglay’s rights issue will further boost its capital base. This should ease concerns about the effect on the bank’s portfolio of treasury assets. The rights issue is fully underwritten by Citigroup and UBS.

With pressure on the banks from financial regulators to boost the amount of capital they hold is likely to have caused the decision to be made. At the end of December, the lender had a tier one capital ratio – the key measure of balance sheet strength – of 8.6 percent, similar to RBS’s increased target.

B&B said that the rights issue would have given it a pro forma Tier One ratio of 10.1 per cent as at December 31, and the board revised its target ratio range to between 8 per cent and 10 per cent.

Lending margins on new mortgages have widened significantly in recent months as smaller specialized lenders have been forced out of the market. The additional capital will allow B&B to continue selective mortgage lending in the buy-to-let market.

In a statement B&B said: “Demand for buy-to-let mortgages remains high with continuing tenant demand and rising rents. The supply of mortgages to meet this demand is constrained by the lack of funding generally and the withdrawal of several competitors from the mortgage market.

“In raising this additional capital, the directors are confident that the group will be better placed to take advantage of these market conditions by writing selective good quality business at attractive margins.”