Royal Bank of Scotland pledged last night to ask shareholders to let it pay top executives bonuses worth double their salaries despite a shock profit warning that will result in the bank reporting losses up to £8bn.

In an unscheduled trading update the bank said it was setting aside another £2.9bn to cover costs arising from “past conduct issues” – fines and settlements of scandals such as mis-selling subprime mortgage backed securities in the US and payment protection insurance and interest rate swaps in the UK.

Combined with provisions already taken and losses of up to £4.5bn from the internally created “bad bank”, RBS could rack up £8bn in losses from past misconduct for 2013.

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The final tally won’t come close to the £24.1bn loss for the year of the financial crisis. But even after operating profits have been factored in, it will still leave the bank heavily in the red. That promises to create a political firestorm because its chairman, Sir Philip Hampton said the bank would press for the taxpayer – which holds an 81 per cent stake – to vote in favour of the 200 per cent bonuses which require its approval under EU bonus cap rules.

Sir Philip said: “We obviously need to be sensitive to our shareholding structure and [to] the political and media issues around that, but the ability to pay to compete is fundamentally where the business needs to be.”

Labour has called on the Government to vote no despite nine of the bank’s top executives having agreed to waive bonuses on the back of last night’s announcement. Ross McEwan, who took over as chief executive from Stephen Hester in October, said they were not responsible for the huge provisions but had taken the step to show “leadership”.

He insisted that RBS could still afford to invest in its creaking IT infrastructure, which has left customers shut out of their accounts.

The bank’s core tier one capital ratio – a key measure of capital strength – could now drop to just above 8 per cent from 9 per cent, a long way from where regulators want it to be. But Mr McEwan said measures such as the flotation of RBS’s US arm, Citizens, would improve the situation: “I think we have got the ingredients to make a pretty good bank here. We now have a stronger bank that can take these provisions.”

The £2.9bn of new provisions includes £1.9bn for misconduct issues such as US settlements over subprime mortgages, some £465m for PPI mis-selling, which takes the total cost to £3.1bn, and a further £500m for interest rate swap mis-sellling, taking the total to £1.3bn.