The losses widened from £1.2 billion in 2011 after its £390 million settlement for Libor rate fixing, while the bank revealed another £1.1 billion in provisions to cover mis-selling claims.
RBS set aside a multi-million pound bonus pool - including £215 million for investment bankers - but said it was recouping £302 million for its Libor settlement by cutting the 2012 bonus pot, clawing back from previous years and reducing current year awards.
Sir Philip Hampton, chairman of the part public-owned bank, said he did not know if taxpayers would ever get back the money used to rescue RBS.
"We will do our best to see if the taxpayers' money can be returned, but the bank was in a terrible mess, if you go back four or five years, it needed substantial re-capitalisation.
"Although we've had a difficult year I think we're on track for recovery. It will be for the government to decide when it sells its shares and how much they can get for them. Our job is to put the bank fully back on its feet."
Asked why RBS can afford to pay bonuses to its staff but not what the public spent in bailing it out, Sir Philip described the bonus situation as "toxic for everybody".
He said: "The bonus rates have been falling very substantially. Our bonuses now in our markets business, where all the big bonuses are, are 25%, a quarter of what they were four or five years ago."
He conceded bonuses were "still huge", but said "it is a very difficult, competitive marketplace, and if you don't pay what you need to pay you don't get the best people".
Sir Philip said bonus levels were "tough to swallow" for the pubic, but that levels are falling "slowly but surely".
He said RBS was trying to rebuild customer service and confidence, but that it couldn't be done over night.
