As a result, the government is expected to buy nearly all $30bn worth of shares, with $23bn going for ordinary shares and about $8bn for preference shares.

This will leave the British treasury owning 57.9 per cent of the bank, and sitting on an immediate paper loss on its investment of $8bn.

The British treasury was not immediately available for comment.

Bank recapitalisation

The deal forms the largest part of the government's wider plan to recapitalise Britain's banks.

Last month, RBS, Lloyds TSB Group PLC and HBOS PLC agreed to sell a combined $57bn worth of stock to shore up their balance sheets.

In all three cases, the government guaranteed to buy any shares not purchased by investors.

Shares in RBS were roughly flat at 55 pence in early trading on the London Stock Exchange, as the market had been widely expecting that the government would be taking a majority stake in the bank.

Last week, shareholders approved the capital raising plan though it was clear that ordinary investors would be unlikely to buy the new shares because they were selling for 65.5 pence, about 28 per cent more than the existing share price.

RBS shares were above 380 pence last December, and above 200 pence as recently as September 26.

The bank is expected to buy the preference shares back from the government as soon as possible because it will be forbidden from paying any dividends to ordinary shareholders while the preference shares are outstanding.

The  fundraising plan comes in addition to a $18bn rights issue by RBS earlier this year, at the time the biggest ever rights issue in Europe.

RBS has been one of the hardest hit European banks in the financial crisis because of its large exposure to sub-prime loans and its expensive purchase of ABN Amro bank just before the credit crunch.