According to the bank, the move is part of a âliability management exerciseâ to boost its balance sheet after relying on government bailouts worth more than Â£45 billion to help survive the global financial crisis.
The move is expected to boost the value of the firmâs assets by Â£1 billion, increasing the figure to Â£1.5 billion, the Daily Telegraph reported.
RBSâs capital core ratio could go up to 11.3 per cent following the exercise.
Ian Gordon, an analyst at Exane BNP Paribas in London, told Bloomberg: âAn offer to a large range of subordinated debt holders to either redeem this debt below par or swap it into senior debt allows RBS to crystallize losses.
âWhatever RBS does, core capital would be strengthened.â
RBS is currently 84 per cent owned by the government after its reliance on state bailouts.
By Jim Ottewill