Thousands of jobs are under threat as Royal Bank of Scotland (RBS) slims down its global markets and investment banking division as part of the price of the Government's £20 billion capital injection.

RBS has agreed to “a significant downsizing of capital-intensive businesses” within the division, which employs 25,000 people, most of them in Britain. It has also agreed to reduce proprietary risk, suggesting that proprietary traders could be under threat.

Stephen Hester, the British Land boss who is taking over as chief executive from Sir Fred Goodwin, said that there were no sacred cows, but he added that RBS would remain an important international bank.

He said: “Inevitably, there will be a process of change agreed with my colleagues to overhaul the strategic direction. This bank will be materially changing in a number of ways.”

Although the Government has not explicitly banned RBS from the higher-risk securities business, some of its practices, such as proprietary trading, are considered difficult to justify now that the bank is being financed with taxpayers' money.

Under the terms of the rescue finance package, RBS will not pay a dividend until all the £5billion of preference shares issued to the Government are repaid in full, the bank acknowledged yesterday.

In the two-step capital-raising, RBS plans to generate £15 billion by issuing new shares available to existing shareholders but underwritten by the Treasury, which will buy any unwanted shares.

The Treasury will also buy £5 billion of preference shares paying an interest rate of 12 per cent.

These are repayable after five years or earlier by mutual consent. Sir Tom McKillop, the chairman of RBS, said that the aim was to pay back the preference shares as soon as possible. He said that it was a good deal for taxpayers.

The new ordinary shares will be sold at 65p in a placing and open offer. Shares in RBS closed yesterday at 65.7p, down by 8 per cent.

Sir Fred will step down soon with no payoff. Under his contract, he had been entitled to £1.2 million. “It's very painful for everyone,” he said yesterday, revealing that he was waiving any payoff. “I'm a shareholder, too.” This year Sir Fred has lost £8.3 million on his RBS shares, which are worth only £1.9 million, according to the DigitalLook.com investment website.

Sir Tom will leave at the annual meeting next April. His successor has yet to be decided.

Johnny Cameron, head of the global markets and investment banking division, is standing down from the board but is continuing to work in the business for now.

Mr Hester has yet to be released by the board of British Land but is expected to start at RBS in four to six weeks.

RBS still plans to sell its general insurance operations, which include Direct Line and Churchill. The capital injection yesterday prevented the need for a fire sale.

Up to three new non-executive directors, with relevant commercial experience, will be appointed and the Treasury will work with the board to find suitable candidates, RBS said.

No bonus will be awarded to any board member and any 2009 bonuses will be paid in shares carrying restrictions on quick selling.

RBS also issued a profit warning yesterday, revealing that second-half results would be worse than it had indicated at its interim presentation on August 8.

Royal Bank of Scotland

— RBS to raise £20 billion through £15 billion issue of ordinary shares and £5 billion of preference shares

— Ordinary shares priced at 65½p, an 8.5 per cent discount to the closingprice on Friday

— The Government will own just over 60 per cent if existing institutions do not take part

— Sir Fred Goodwin, chief exec, to leave, replaced by Stephen Hester

— Sir Tom McKillop, the chairman, to retire in April

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