3,500 jobs to go across its investment banking division and 950 to go at Ulster Bank
The job cuts, most of which will happen this year, are part of a wider plan to shrink the size of its investment banking operations and are in addition to 2,000 job cuts already announced.
RBS also confirmed today it would cut 950 staff from its Irish banking subsidiary, Ulster Bank, with 600 jobs to go in the Republic of Ireland and 350 in Northern Ireland.
This follows on from a 1,000 jobs being cut at the Ulster Bank business in 2009.
Chancellor George Osborne warned RBS chiefs last December to reduce the banks' exposure to higher risk activities.
In a statement to Parliament Osborne said: "Investment banking will continue to support RBS's corporate lending business but RBS will make further significant reductions in the investment bank, scaling back riskier activities that are heavy users of capital or funding."
The banks wholesale banking business, which provides services such as investment banking advice to large clients, will now be split into separate 'markets' and 'international banking' divisions.
RBS will also exit from cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses.
Group chief executive, Stephen Hester,said: "We launched the RBS recovery plan in 2009 with strategic tests for the businesses that the Group would retain.
"They would be restructured and managed to sustain strong, customer driven competitive positions, return more than their cost of capital, use a proportionate amount of Group resources and be closely connected with each other.
"This strategy has succeeded in making RBS stronger and placing us on the road to long-term success.
"We have reduced our balance sheet by some s600 billion and have rebuilt capital ratios that place us among our strongest international peers."
He added: "But for our strategy to be effective, it must adjust to fresh challenges.
"And it is clear that, particularly in the wholesale banking arena, significant new pressures have emerged.
"The changes we are announcing today seek to ensure that RBS is at the front of the pack in pursuing a strategy that reflects the environment we expect to operate in.
"Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall."
RBS's total assets grew more than 300 per cent between 2004 and 2008, from s588 billion to s2.4 trillion,growth the FSA says was accompanied by inadequate capital support and by greatly increased leverage.
Also significant was the growth in derivatives - financial products used for hedging and insurance - which rose ten-fold within the same period, from s17.8 billion to s247.2 billion.
Assets held by RBS's investment banking arm Global Banking Markets (GBM) grew on average by 34 percent each year between 2004 and 2007, with around half of that growth made up of derivative assets.
GBM accounted for 57 per cent, 62 percent and 70 per cent of the total assets held by the RBS group in the years 2006, 2007 and 2008 respectively.
Since taking on the role of chief executive in 2009 Hester has shrunk the RBS balance sheet by around s600 billion.
Shares in RBS rose more than seven percent in early trading today.