Morgan Stanley is to offer to buy back up to $4.5 billion of auction rate securities from retail clients, following on the heels of other major banking groups including Citi, Merrill Lynch and UBS.

The Wall Street firm said the offer which will be open in October and November will cover retail clients, individuals, charities and small to medium-sized businesses with accounts of $10 million or less, who bought auction rate securities through the firm before 13 February 2008.

Morgan also said it would make up losses suffered by retail clients who bought ARS through the bank before 12 February and sold the securities at a loss between that date and 11 August 2008.

The bank also said it will attempt to provide liquidity solutions for institutional investors in a similar position to its retail clients.