LONDON State-backed Royal Bank of Scotland (RBS.L) said it would ask shareholders for approval to issue debt that converts into equity if the bank hits trouble.
The bank said on Friday that in response to UK regulatory requirements for banks to hold more capital and to allow it "to manage its capital in the optimal way" it would seek approval to issue loss-absorbing capital instruments in the form of equity convertible notes (ECNs), also known as "CoCos".
CoCos are bonds that convert into new shares if an event occurs, such as if a bank's capital ratio fell below 7 percent. RBS needs shareholder approval as issuing new shares could dilute existing shareholders.
Other UK banks are also considering issuing CoCos and Barclays' shareholders gave approval for it to issue ECNs on Thursday.
(Reporting by Steve Slater; Editing by Mark Potter)