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Shares in Royal Bank of Scotland (RBS) plunged by 70 per cent today to a new low amid fears the Government will fully nationalise the struggling lender, which expects to report a £28 billion loss for the year and admitted that more could be on the way.

RBS' loss, which will be confirmed on February 26 when it announces it full-year results, emerged as the Government revealed a second package of measures designed to encourage banks to start lending money again to ease the credit crunch.

As part of the measures, RBS revealed that the Government will increase its current 58 per cent stake in the bank to 70 per cent. Last October, the Government injected £20 billion into RBS as part of the Treasury's first banking bailout attempt.

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Both Gordon Brown, the Prime Minister, and Alistair Darling, the Chancellor, refused this morning to comment on whether RBS will be fully nationalised, joining Northern Rock, which became state-owned last year.

However, speculation is mounting that RBS will be taken into state-ownership and the bank spooked investors today after it admitted that it may announce even more losses on top of the £28 billion loss.

It will be the biggest loss in UK corporate history, more than double the current record set by Vodafone, the telecoms giant that reported a £15 billion deficit in 2006.

Shares in RBS plunged as much as 70.6 per cent, or 10.2p to 10.2p today. They rallied a little to close down 66.57 per cent or 23.1p to 11.6p. The bank's shares peaked at 607p in February 2007.

Stephen Hester, chief executive at RBS, who took over from Sir Fred Goodwin last year, said: "The world remains an uncertain place. We can all be sure there will be future significant credit losses but we can’t be sure of what amount and what timing…all banks are facing uncertainties.”

RBS blamed £20 billion of its losses on last year's acquisition of ABN Amro, the Dutch bank.

Today, the Prime Minister lambasted RBS for its irresponsible behaviour, admitting he was "angry" with the bank.

Mr Brown said this morning that Britons had a right to be furious at "irresponsible" behaviour which saw RBS spend billions last year acquiring ABN Amro, the Dutch bank which had exposure to US sub-prime mortgages, as well as investing directly in the American home loan market.

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