TheRoyal Bank of Scotland is expected to record high losses as it is being forced to set aside funds to meet legal costs.

The bank is being forced to set aside millions of dollars to cover legal and regulatory costs for mis-selling thousands of policies. The RBS has set aside £3 billion to cover expected costs from legal actions in the country. RBS is now on course to lose around £8billion this year, which is its biggest deficit since£24billion loss recorded more than five years earlier.

The bank is setting aside £2billion to cover legal case brought by US victims and £500million to cover continuing compensation claims for mis-selling of PPI loan insurance, and a further £500million to pay compensation for 'interest rate swaps'.

Chief executive Ross McEwan, who took over the company in October of the previous year, has said that it is planning to reduce its cost base. The company is aiming to reduce cost to income percentage to 50s from the current level of 65 per cent.

McEwan's plans are expected to be revealed during the coming month until he announces the bank's annual results in February. Officials have said that that the bank would limit its markets and international banking operations and will also aim for greater automation of high street banking services.