National Australia Bank (NAB) has pumped GBP387m fresh capital into its British subsidiary Clydesdale. The capital is being injected through the creation of new shares.
On July 1, 2010, NAB received clearance from British regulator FSA to inject fresh capital into Clydesdale.
Clydesdale has emerged from the financial crisis unscathed compared to its counterparts. However, its profit has nosedived to GBP4m pounds in the six months to the end of March 2010 from GBP30m in the previous year, as bad loan losses jumped 12% to GBP188m.
The current capital injection from the parent bank NAB is expected to help Clydesdale, which has over 300 branches in the UK, to absorb losses on loans if economy slumps again in future.
Earlier too in 2008, NAB had pumped GBP700m capital in Clydesdale.
A spokesman of NAB said: “It is basically a business- as-usual transaction and underlines the group’s commitment to being capitally strong. The group’s capital position is completely unchanged through this. It is how we split it internally.”
Regulators all over the world, including FSA, under fire for not taking appropriate measures to protect UK depositors in foreign banks, are mandating banks to strengthen their capital base in-order to protect depositors against the risk of losses from bad debts as economic conditions remain uncertain.