The figure is more than treble the £2 billion loss the group reported last year.
The figures take into account £10 billion in legacy costs, including litigation and conduct charges of £6 billion.
RBS plans to cut costs with £2 billion of restructuring over the next four years, which will result in thousands of job losses and branch closures. This will include £750 million of savings in 2017.
The lender has also had to set aside £3.1 billion ahead of an expected fine from US authorities linked to mortgage backed securities.
The bank, which is 72% owned by the Government, has racked up more than £50 billion in losses since it was bailed out by the taxpayer during the financial crisis.
Ross McEwan, RBS chief executive, said: “The bottom line loss we have reported today is, of course, disappointing but given the scale of the legacy issues we worked through in 2016, it should not come as a surprise.
“These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis.”
The money set aside by the bank is to cover the costs of an upcoming penalty from the US Department of Justice for mis-selling US securities backed by toxic mortgage loans in the run-up to the financial crisis.
Some analysts are predicting the fine could be as much as £9 billion, the largest regulatory fine in history.
The bank also confirmed it has abandoned plans to sell off its Williams & Glyn business. This has been a costly embarrassment for RBS, which spent £700 million in 2016 to spin-off the bank.
It was the only British lender to fail the Bank of England’s stress tests in 2016. The British Government has said it will not resume selling its stake in the beleaguered bank until it settle its fines with the US and resolves its state aid demands with the EU.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “RBS is still paying for the sins of the past, though the bank is now saying that 2017 is going to be its last year in purgatory, and that shareholders can look forward to a brighter, more profitable year in 2018.
“That may well be the case, there is a decent bank inside RBS struggling to get out, but it’s those ‘one-off items’ which pop up with such alarming regularity which keep pushing the bank deep into the red.
“RBS is of course still three quarters owned by the government, and that will remain the case for the foreseeable future, seeing as the share price needs to double for the taxpayer to break even.
“The bank is certainly making progress, though it has been severely hampered by mopping up the mess left by the financial crisis. There is every reason to believe RBS can be a profitable bank, returned to private hands, the question is how long it will take to get there.”