Royal Bank of Scotland Group PLC, the biggest U.K. government-owned bank, will swap or repurchase as much as $23.5 billion of subordinated notes and preference shares in a plan to bolster its capital.

RBS and its National Westminster Bank PLC unit offered to buy back some dollar-denominated preference shares with a face value of $14.3 billion, paying as little as 52 cents on the dollar, the Edinburgh lender said. RBS also plans to swap as much as $9.2 billion of Tier 1 and Tier 2 subordinated securities for new senior notes or cash.

The swap is expected to help generate a gain of 1.25 billion pounds and boost RBS' so-called core Tier 1 capital ratio by about 0.35%, it said in a separate statement. CEO Stephen Hester is selling assets and paring activities such as leveraged finance after RBS took 45.5 billion pounds in taxpayer aid, more than any other bank in the world.

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