Government to own majority of RBS / NatWest

The sale is part of the government's bail-out of the banking system

The government is to own 57.9% of Royal Bank of Scotland after shareholders bought only a tiny proportion of the new shares being offered by the bank.

The small take-up had been expected as the offer price of 65.5p was about 10p higher than the price at which the shares were trading.

The share issue by RBS, which owns NatWest, was part of the government's plan to recapitalise banks.

The government will pay about £15bn for the majority stake in the bank.

It will also buy £5bn of preference shares in the bank.

Existing shareholders agreed to buy almost 56 million shares, which represents just 0.24% of the new shares on offer, at a cost of £36.7m, making an immediate paper loss of £5.6m.

Strings attached

RBS shareholders voted to take the government money at a meeting last week.

There will be strings attached, with the bank losing freedom in areas such as executive pay and dividend policy.

RBS also had to agree to return to "normal" lending practices, and last week it announced that it would guarantee overdraft rates and contracts for its business customers for at least a year.

RBS is one of the many banks that has been hit by its exposure to debt based on US sub-prime loans.

It has also struggled with the collapse in inter-bank lending as the whole industry worried about which of their peers they could afford to lend to.

Critics say that RBS paid too much to buy ABN Amro last year. It led a consortium that paid 71bn euros ($91bn; £61bn) for the Dutch bank in October 2007.