Sir Fred Goodwin faces demands from leading investors to step down as chief executive of Royal Bank of Scotland within a year after the bank on Tuesday launched a £12bn rights issue.

UK Daily View

Video: RBS writedown will force rivals to come clean

Several of the lender’s largest shareholders said they would push for a clear succession plan for Sir Fred, the architect of the bank’s acquisitive strategy and its role in the €71bn break-up bid for ABN Amro, the Dutch bank.

“We want a clear indication from the company about when Sir Fred will leave,” one top 10 investor said. Sir Tom McKillop, the chairman, is also under pressure to step down.

The calls from shareholders, who declined to be identified, came as RBS confirmed plans for its rights issue, Europe’s largest. The bank will also raise a further £5bn by selling all, or part of, its insurance division in an effort to raise its core Tier One capital ratio, a key measure of reserves, to more than 6 per cent.

Investors said they were prepared to give RBS, which is due to face shareholders at its annual meeting in Edinburgh today, some time to complete the rights issue but said they expected the bank to outline a timetable for Sir Fred’s departure afterwards.

Another big investor said: “Neither chief executive nor chairman are likely to be around much longer than a year.”

Sir Tom acknowledged on Tuesday that the bank’s decision to participate in the €71bn break-up bid was badly timed: “Looking back we purchased ABN Amro at a point where bank valuations were way higher than they were today. That is unfortunate. You could call that misjudgment.”

But he insisted that the board and executive team were collectively responsible for the bank’s position and would work together to turn it round. Sir Tom also dismissed accusations that the board had failed to curb Sir Fred’s acquisitive urges. “This is an extremely strong board,” he said. “There are no patsies on this board.”

Nevertheless, RBS said it was searching for three new non-executive directors – one from the US, one from the UK and one from Asia – to broaden the range of experience on the board.

David Cumming, head of UK equities at Standard Life Investments, which holds 3.5 per cent of RBS, said: “Sir Fred Goodwin justifies continued support.

“However, he has to fully engage with his shareholder base and [he needs] a strengthened non-executive board to maintain that support.”

The rights issue, which will see RBS issue 11 new shares priced at 200p for every 18 existing shares, received a lukewarm response on Tuesday as investors concentrated on the bearish outlook for RBS’s investment banking arm and the likely impact on future profits.

“We see the RBS rights issue as a recession indicator that should be used as a negative read for the whole sector earnings outlook,” analysts at Morgan Stanley wrote.