Royal Bank of Scotland is expected to reveal a loss of £2bn after the eurozone crisis hit the performance of its investment bank

Royal Bank of Scotland risks igniting a row over City pay when it is expected to announce it is setting aside almost £400m for bonuses despite reporting its fourth consecutive year of losses.

The Edinburgh-based bank, which is more than 80% owned by the taxpayer after a series of bailouts that began in October 2008, is expected to try to defuse any controversy by revealing that 10,000 of its top staff will have pay freezes after a year in which the bank is is expected to reveal a loss of £2bn. The eurozone crisis dented the performance of its investment bank while the retail arm will be hit by a £1bn provision for payment protection insurance (PPI) mis-selling.

After the furore surrounding the award of a near-£1m bonus for chief executive Stephen Hester – - which he waived – he is still on course to be handed £600,000 in bonuses next month while close colleagues in the next few weeks could be handed up to £11m depending on the share price and their performance.

David Hillman, a spokesman for the Robin Hood Tax campaign, on Wednesday:"It is incredible that while the rest of us suffer, a loss-making bank bailed out by the taxpayer is allowed to pay out hundreds of millions in bonuses. The British public is getting a raw deal from RBS and the wider financial sector: it is time they were made to pay their fair share rather than line their own pockets." TUC general secretary Brendan Barber added pay and bonuses were "out of control" in the City.

Making reference to Hester's salary, Liberal Democrat peer Lord Oakeshott said that "every small business in Britain would love to have their bosses' pay frozen at £1.2m".

The bonus pot, expected to be just under £400m, is more than half the £950m paid out in 2010 .The chief executive will on Thursday present a three-year report card to set out the progress the bank is making - despite the £21bn loss the taxpayer is currently incurring in its 82% stake - along the path to recovery following the near £24bn record-breaking loss he inherited in 2008.

Hester will add further detail to the £38bn of costs that have already been incurred to clean-up the bank. Some £28bn relate to losses on loans which have turned sour and almost £3bn from restructuring charges as 33,000 roles have been shed since the financial crisis.