Royal Bank of Scotland, Britain's biggest government-owned lender, is on track for its largest pre-tax loss since 2008 after setting aside a further £3.1 billion (HK$39.8 billion) for legal and compensation claims. The provision included £1.9 billion for lawsuits and fines tied mostly to the sale of US$91 billion of mortgage-backed securities from 2005 to 2007, the lender said on Monday. It follows agreements Deutsche Bank, JP Morgan Chase and UBS struck with regulators in the United States to settle claims they did not provide adequate disclosure about mortgage-backed debt sold in the housing bubble that preceded the 2008 financial crisis. RBS chief executive Ross McEwan is attempting to overhaul the lender by eliminating assets and jobs. He said in November that the bank would log a "substantial" full-year loss after £4.5 billion of write-downs. His efforts are being hobbled by the cost of past regulatory missteps. More than five years after giving RBS the biggest bank bailout in history, the British government still has not been able to cut its 80 per cent stake. "This looks like a new CEO's attempt to clear the decks and draw a line under the matter," said Joseph Dickerson, an analyst at Jefferies International. The stock fell 2.2 per cent to 332.2 pence in London on Monday, below the 407-pence price at which the government said it would break even on its holding. It has lost 9.2 per cent in the past 12 months while Lloyds Banking, the second-biggest government-owned lender, is up 50 per cent. The Treasury sold a £3.2 billion stake in Lloyds in September, its first step to returning the bank to full private ownership. "When the crisis broke, the bank was involved in a number of different businesses in multiple countries that have subsequently faced heavy scrutiny by customers and regulators," McEwan said on Monday. "The scale of the bad decisions during that period means that some problems are still just emerging." RBS may now post a loss before tax and gains and losses on its own debt of about £6.8 billion for last year, said Gary Greenwood, an analyst at Shore Capital. It would be the biggest since 2008, when the lender posted a loss of about £8.3 billion, he said. The bank is scheduled to report full-year results late next month. Eight top executives would not receive bonuses for 2013, RBS said. McEwan, who replaced Stephen Hester in October, had already waived his. Even so, the lender is in talks with shareholders, among them the government, to get permission to pay employees bonuses of up to twice their base salary. "The right position of the business is to be commercial," RBS chairman Philip Hampton said. "The ability to pay competitively is fundamental to the prospects of the business." The provision included £465 million for customers sold insurance on loans they did not require, £500 million for clients wrongly sold interest-rate-hedging products and a further £200 million for legal expenses, the lender said. That brings the total RBS has set aside to compensate clients mis-sold payment protection insurance to £3.1 billion, putting it third among British banks after Lloyds and Barclays. RBS said that rather than declining as expected in the final three months of last year, claims continued at the previous quarterly rate of about £225 million. The charges led the bank to cut the forecast for its core tier one capital ratio, a measure of financial strength, at the end of 2013 to about 11 per cent from an earlier estimate of 11.6 per cent and 9.1 per cent in November.