LONDON BRIEFING:HBOS shares are sliding in the run-up to its rights issue, but RBS pulled off a massive fundraising

ONE DOWN, two to go: Royal Bank of Scotland (RBS) may have pulled off its mammoth £12 billion fundraising, but Halifax Bank of Scotland (HBOS) and Bradford Bingley, which also have the begging bowls out to shareholders, are not in the clear yet.

On Monday, as RBS directors celebrated the success of their fundraising - the biggest corporate cash call ever seen in Europe - the spotlight switched to HBOS. Although, at £4 billion, it is asking for only one-third of the amount raised by RBS, the bank's chances of pulling it off with similar ease look increasingly slim.

Shares in HBOS have crashed by more than 70 per cent over the past year and yesterday they crumbled another 5 per cent, taking them below the 300p level, at 295.74p.

This leaves them dangerously close to the 275p price the bank's army of small shareholders are being asked to pay for their new shares.

Shares in RBS also suffered a slump in the run-up to its rights issue deadline, although the gap between the market price and the cash-call terms is even narrower at HBOS after yesterday's fresh slide. There is a feeling that RBS made a rather stronger case for its cash than HBOS has, although HBOS chief executive Andy Hornby has been on a charm offensive in the City of London in an effort to drum up support for his cash call.

RBS also had the advantage of being the first in the queue for cash - for those following behind, there is the distinct danger that investors will start to suffer from "chequebook fatigue."

There is also a crucial difference in the shareholder bases of the two banks. While the shareholder register at RBS is dominated by large institutions, which typically support rights issues, HBOS has two million private shareholders - the largest non-institutional shareholder base in the country.

Many of these small shareholders hold only a few hundred shares in the group, which they were given when the Halifax, Britain's biggest building society, was de-mutualised. Those shares may have come free, but that has not eased the pain of seeing them shed three quarters of their value over the past year as the credit crunch caught hold.

Just how many of those two million investors, who together account for more than 25 per cent of HBOS's shares, will be willing to stump up the cash to take up their rights? Like the rest of the country, their budgets are under strain from higher petrol prices, utility bills and rising food prices. As the discount for the new shares continues to erode, many will see the chance of taking up their rights not as an opportunity, but more as throwing good money after bad.

If small shareholders do shun the HBOS cash call, the underwriters will be left with far more work to do than they had at RBS, where they had to place a rump of only 5 per cent. Some reports suggest the rump for the luckless investment banks guaranteeing the cash at HBOS - Morgan Stanley and Dresdner Kleinwort - could be as much as 20 per cent of the new shares.

Much of that risk will have been passed on to sub-underwriters but the end result will be the same - £800 million of unwanted shares could flood onto the market and HBOS shares could head even further south.

The deadline for HBOS shareholders to take up their rights is July 18th and the strength of the bank's share price over the coming weeks will be crucial to the eventual take-up of the new shares.

At Bradford Bingley, meanwhile, disaster looks to have been averted with an unprecedented support operation organised by the authorities. The Financial Services Authority has persuaded the country's big five banks - HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS - to sub-underwrite their smaller rival's re-priced £258 million fundraising.

Each of the banks is understood to have agreed to sub-underwrite £20 million worth of the issue, taking the pressure off the investment banks who guaranteed the cash after last week's controversial re-pricing of the new shares. It is an unprecedented move - and one which demonstrates depth of the crisis facing Britain's banking sector.

And neither is RBS out of the woods. Although it will be a very grateful board of directors that faces shareholders today at the group's annual meeting in Edinburgh, any celebrations at pulling off their mammoth cash call will be short-lived.

Investors want reassurance that the integration of ABN Amro is being accelerated and are also calling for the board to be strengthened.

Fiona Walsh writes for the Guardiannewspaper in London