Most Americans are baffled that the English can maintain interest in a game of cricket lasting five days. Most Wall Streeters are equally bemused that British companies persist in raising capital through a traditional rights issue which can last months.

The first merely risks boredom. The second, particularly for a bank under pressure, can be much more serious to the health.

Lehman Brothers provided a fine example yesterday of how the game is played in the US. In the space of just three days, it signed up investors prepared to hand over $4 billion for shares priced at a 13 per cent discount to the market price.

In contrast, it will take HBOS the thick end of three months to raise £4 billion from shares priced at a 45 per cent discount to the market.

As HBOS has found to its cost, the drawn-out timetable for a traditional rights issue leaves a company vulnerable.

The big discounts that have become standard for rights issues these days combined with the market clout of hedge funds, can lead to severe pressure on a company’s share price during the process. Short-selling by hedge funds appears to be at least partly responsible for the fall in HBOS’s share price, which closed at just 12 per cent above the rights price.

There is of course a key difference between the discount in Lehman case and the HBOS issue. Lehman is not offering the new shares to existing shareholders, which therefore suffer dilution from the cheap stock, whereas HBOS’s investors get first refusal on the new stock. If they do not take up their rights they get compensated for the discount between the price of the new shares and the new market price.

British institutional investors have historically been so concerned about dilution that they have severely restricted UK companies’ flexibility to raise large sums other than through rights issues, in spite of the high cost of underwriting involved.

US shareholders have been more relaxed about dilution, considering other factors, including speed, as more important. In the Lehman case, staff hold about a third of the shares but senior management were prepared to see their stakes diluted. Even before the Bradford & Bingley debacle, it appeared likely there would be some soul-searching about the rights issue process. It has now emerged that the Financial Services Authority strong-armed the big five UK banks into sub-underwriting B&B’s repriced issue, making a debate about the drawbacks of the rights issue process inevitable.

Lehman made the UK banks’ life more uncomfortable yesterday by aggressively marking down its holdings of mortgage-related holdings to reflect the actual prices it achieved as it reduced the gearing on its balance sheet during the second quarter.

Bank shares were hit as investors worried that UK banks had not made such big sales or taken such big hits in the hope that market conditions would improve.

Concerns are mounting in particular that Barclays is in denial about its need to raise capital. People close to Barclays say that some of its big shareholders have made clear that they would not favour a deeply discounted rights issue unless absolutely necessary.

But there is an argument that it should raise money now by whatever means in case conditions worsen. Otherwise it may find that rain stops play.

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