Royal Bank of Scotland has set aside a further $3.8bn (£3.1bn) to cover fines in the US, the bank has said.
The provision is for an expected penalty over the sale of financial products linked to risky mortgages before the 2008 financial crisis.
RBS, which is 72% state-owned, has now put £6.7bn aside to cover litigation by the US Department of Justice (DoJ).
It means the bank is set to report a loss for 2016, the ninth year in a row that RBS has lost money.
Chief executive Ross McEwan has been trying to end RBS’s legal wrangles so that the government can sell its stake in the bank, which was the result of a £45.5bn bailout during the financial crisis.
Ministers have shelved plans to sell further shares in the lender, in part because of uncertainty over the scale of the potential DoJ fine.
In a statement, Mr McEwan said: “Putting our legacy litigation issues behind us, including those relating to US residential mortgage-backed securities, remains a key part of our strategy.
“It is our priority to seek the best outcome for our shareholders, customers and employees.”
RBS’s potential US penalty could fall anywhere between $12bn and $20bn, experts say.
It remains to be seen whether the new US administration takes a tougher or more lenient approach to misconduct by European banks.
RBS said it was uncertain about the “duration and outcome” of the investigations into its mortgage selling activities before 2008 – including whether a settlement with the Department of Justice (DoJ) could be reached.
It also said it could face “additional provisions and costs” and that other “adverse consequences may occur”.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said the cost of US litigation was the biggest in a long line of problems for the bank.
“Today’s announcement gives the market an additional steer, directly from RBS, as to what the cost of US litigation may be.
“However, the additional provisions will take a toll on the bank’s balance sheet, which it was already busy repairing after it failed a Bank of England stress test last November.”
He added: “RBS is heading in the right direction, but progress is slow, profitability is elusive, and a return to private ownership is in the long grass.”
Most of the big banks have faced litigation over claims they mis-sold toxic mortgage-backed bonds in the run-up to the financial crash.
Credit Suisse and Deutsche Bank agreed to pay $5.3bn and $7.2bn to settle their respective mis-selling cases in January.
The DoJ is suing Barclays for alleged mortgage securities fraud after the bank walked away from negotiations in December.