Part-nationalised Royal Bank of Scotland has declined to comment on reports it is preparing to hand out huge bonuses to investment bankers despite expected annual losses of £7 billion.

RBS, which is 84 per cent owned by the taxpayer, is in final discussions with the Treasury over its bonus pool this year and the bank could pay out around £1.3 billion to its investment bankers even as around £14 billion in bad debts plunge the ailing firm deep into the red.

RBS refused to comment on the speculation although chief executive Stephen Hester has said it will pay its bankers “the minimum we can get away with”.

But Mr Hester has also stressed the profitability of its investment banking arm will also be a key factor in an eventual return of RBS to the private sector.

Huge windfall profits among investment banks are in prospect this year, fuelled by state interventions to prop up the system following the financial crisis and reduced competition after the demise of players such as Bear Stearns and Lehman Brothers.

The final RBS bonus figure will be unveiled in the bank’s results at the end of the month, although RBS is likely to stress that the share of revenues being paid out in awards has been lowered to reflect public anger over bumper payouts.

Chancellor Alistair Darling has introduced a one-off 50 per cent bonus tax this year while President Barack Obama has pledged to get back “every dime” of taxpayer cash from banks and attacked “obscene” payouts.

UK Financial Investments (UKFI), which controls the state’s holding in nationalised and part-nationalised banks, will also be consulted on the bonuses.

City minister Lord Myners recently told MPs that a pay clampdown on top earners at RBS would risk doing even more damage to the bank, where more than 1000 top earners have defected in the past year.

“If we want the RBS to compete in a global world... it has to equip itself appropriately to do that,” he said.