RBS, along with other UK and global banks, has suffered from a drop in the value of risky assets, particularly those linked to US sub-prime mortgages. Sub-prime borrowers are those with poor or non-existent credit histories, and in recent months the number of defaults has jumped.
The BBC's business editor Robert Peston said that RBS's undoing was that it had piled into toxic securities linked to the dire US sub-prime housing market - and its exposure to the poison was increased through the ABN takeover.
As a result, RBS's so-called credit market write-downs were £5.1bn - an almost "incomprehensibly" big figure.
Our correspondent said that this was particularly galling for the bank as the rest of its business was not doing too badly.
As a result of the problems in the US and other global financial markets, many lenders have had to find ways of boosting their cash reserves, with many deciding to sell shares to existing investors via a right issue.
Billions of dollars
Merrill Lynch 36.80
Bank of America 14.60
Morgan Stanley 11.70
Deutsche Bank 11.40
Credit Suisse 8.13
Wasington Mutual 8.10
RBS sold shares worth £12bn in a rights issue that was strongly supported by shareholders, who agreed to buy some 95% of the stock on offer.
The rights issue was the biggest in UK corporate history, and the firm said investors would take up 5.8bn new shares at a value of 200 pence each.
Following the rights issues, RBS said that its core tier 1 capital ratio, a key measure of cash and asset levels, was now 5.7%.
Referring to the current economic difficulties, Sir Fred said the bank had "moved decisively" and had drawn heavily on its shareholders for financial support.
"We recognise that we must now deliver a level of performance that meets their expectations for the company and restores value to our shares. We are determined to do so, and this is our focus," Sir Fred added.
Our business editor said that the chief executive's comments were as close as you will ever hear to a chief executive saying that he is living on borrowed time.
Banker magazine editor Brian Caplan talks to the BBC about RBS's figures
He continued that Sir Fred was under unambiguous instruction from RBS's owners and its non-executives to fix the business, or "he would be out of the door quicker than it takes to say 'ABN was the wrong deal, at the wrong price, at the wrong time'".
Other lenders which have also appealed to investors for extra cash including HBOS, and Bradford & Bingley.
RBS shares have more than halved in value over the past year - including a 25% slump since the rights issue was announced in April.
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