Proposed Placing by Secure Trust Bank

ARBUTHNOT BANKING GROUP PLC ("Arbuthnot" or the "Company")

PROPOSED PLACING BY SECURE TRUST BANK TO RAISE £20 MILLION, PARTICIPATION IN PLACING BY ARBUTHNOT AND REPAYMENT OF SUBORDINATED DEBT BY SECURE TRUST BANK

Proposed Placing

It was announced today that Arbuthnot's 75.5 per cent owned subsidiary Secure Trust Bank PLC ("Secure Trust Bank") is proposing to raise £20 million through a non pre-emptive placing (the "Placing") of new ordinary shares (the "Placing Shares"). Secure Trust Bank intends to use the proceeds of the Placing to provide capital to support various inorganic and organic growth opportunities, and to repay its existing subordinated debt of £5.0 million to Arbuthnot.

Arbuthnot intends to subscribe for approximately £5.0 million of Placing Shares in the Placing, the proceeds from which will be offset against the principal amount of the subordinated debt of £5.0 million payable to Arbuthnot by Secure Trust Bank. Once the bookbuild is completed, the Company will make a further announcement detailing the number of Placing Shares taken in the Placing and its resulting interest in Secure Trust Bank.

Following the Placing, Arbuthnot's percentage shareholding in Secure Trust Bank will reduce and Secure Trust Bank will no longer have any subordinated debt payable to Arbuthnot.

Related Party Transaction

Under the current terms of the subordinated debt agreement between Arbuthnot and Secure Trust Bank, the subordinated debt is repayable at Secure Trust Bank's election from 21 December 2012. The subordinated debt has a maturity date of 22 December 2018 and an annual interest rate of LIBOR plus four per cent. Arbuthnot has agreed with Secure Trust Bank, conditional on the Placing completing, to amend the terms of the subordinated debt to enable early repayment.

If the Placing is completed, the subscription by Arbuthnot in the Placing offset by the early repayment of subordinated debt is considered to be a related party transaction for the Company under Rule 13 of the AIM Rules. The Directors of the Company, other than those Directors who also serve on the board of Secure Trust Bank, consider, having consulted with the Company's nominated adviser, Canaccord Genuity Hawkpoint Limited, that the terms of this transaction are fair and reasonable insofar as the Company's shareholders are concerned.

The Company supports the Placing and wishes to participate in it. The Company's limited participation in the Placing is consistent with its view at the time of the Secure Trust Bank IPO that it would be willing to see a dilution in its shareholding in Secure Trust Bank. The Company intends to vote in favour of the resolutions to be put to Secure Trust Bank's shareholders in connection with the Placing.

Henry Angest, Chairman and Chief Executive of Arbuthnot Banking Group PLC, said:

"Secure Trust Bank has performed well since its IPO, demonstrating that a significant market opportunity exists for a bank without the legacy issues and major challenges being faced by the large established UK banks. Today's proposed placing, will enable Secure Trust Bank to accelerate its strategy of profitable growth both organically and through acquisition."

Enquiries:

Arbuthnot Banking Group PLC Tel: 020 7012 2400

Canaccord Genuity Hawkpoint Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is Arbuthnot Banking Group PLC's nominated adviser. The responsibilities of Canaccord Genuity Hawkpoint Limited, as nominated adviser under the AIM Rules for Companies and the AIM Rules for Nominated Advisers, are owed solely to the London Stock Exchange and are not owed to the Arbuthnot Banking Group PLC or any Director of Arbuthnot Banking Group PLC or to any other person. Canaccord Genuity Hawkpoint Limited is acting exclusively for Arbuthnot Banking Group PLC and for no one else in relation to this announcement and its contents (other than Secure Trust Bank PLC) and will not be responsible to any person other than Arbuthnot Banking Group PLC and Secure Trust Bank PLC for providing the protections afforded to its clients or for providing advice in relation to this announcement and its contents.