The Royal Bank of Scotland (RBS) has set aside £3bn for compensation and litigation costs, as part of an expected £7-8bn pre-tax loss for 2013.

In a statement released on Monday (27 January), the lender said full-year financial results – due to be published on 27 February 2013 – will contain a series of extra provisions for mis-sold products, litigation and conduct claims.

A total of £1.9bn has been earmarked to cover "various claims and conduct related matters affecting Group companies", primarily related to mortgage-backed securities and securities related litigation.

The bank has also identified another £465m to be used for Payment Protection Insurance (PPI) costs, bringing the company's total PPI provisions to £3.1bn, £2.2bn of which had been used by 31 December 2013.

RBS also expects redress and administration costs surrounding the mis-selling of interest rate hedging products to cost it a further £500m, reflecting both higher volumes and anticipated costs.

No specific mention is given to a Financial Conduct Authority (FCA) investigation or potential penalties resulting from claims the bank's lending had directly led to the failure of a number of small and medium sized enterprises (SME). In November, RBS appointed Clifford Chance (CC) to conduct an internal inquiry into the claims.

RBS also becomes the latest in a string of major global banks to see their balance sheets dented by significantly litigation costs.

Two weeks ago, Deutsche Bank and Morgan Stanley both confirmed they had had to set aside additional cash for legal expenses, with the pair racking up Q4 2013 legal costs of €528m (£435.7m) and $1.2bn (£730m).

Earlier this month, US banking giant JP Morgan reported a profit drop for the final quarter of 2013, with earnings hit by $1.1bn (£669m) of legal expenses, including its settlement in relation to the Bernie Madoff investment fraud case.