More than 1,000 bankers are thought to have quit RBS to join rival banks where they can earn guaranteed cash bonuses and higher salary increases.
The number of traders and corporate financiers leaving RBS is expected to accelerate in the New Year as the government takes a stand against bonuses.
Barclays Capital, Nomura and Société Générale are among the banks offering lucrative pay deals to RBS bankers.
To stop the bankers leaving, the RBS board wants to increase the bank’s bonus pool at least 50%, to about £1.5bn, the Times reported.
The board at RBS has threatened to quit if the government blocks the bonuses.
Alistair Darling told the BBC: “These bonuses have to be reasonable and they have to be responsible and I think everyone has to accept that.
“We are not going to be held to ransom by people who believe you can pay extraordinarily high bonuses without regard to what’s going on.”
But Darling admitted there had to be “sufficient incentives” to ensure RBS got back on a “proper footing”.