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The rights issue will offer two ordinary shares for every five existing ordinary shares at a price of 275p per share.

However, banking analysts and asset managers are claiming HBoS' management should have asked for £6bn and are leaving themselves vulnerable to market fluctuations by asking for too little.

The mortgage lender currently has a Tier 1 core ratio of 5.7 per cent which although above the Basel II minimum still leaves the bank with one of the lowest ratios in the sector following The Royal Bank of Scotland (RBS) rights issue last week.

One industry insider said: "They (HBoS) were already playing with a low ratio compared with their competitors and this is their one chance to raise as much as money as possible.

"Whatever you think of UBS they have kept Tier Capital Ratio at close on 12 per cent and really made sure they have as much funding as possible.

"HBoS should have asked for 50 per cent more as the credit crunch is far from over. They will not have the chance to do this again as they would be crucified."

In the same statement, HBOS wrote-off £2.8bn from the value of its investments linked to the US sub-prime mortgage market and the global credit crunch.

HBoS said the £4bn rights issue was sufficient and would give them one of the strongest balance sheets of all the major UK and European banks.