The move follows an EC investigation in which it found the $60 billion (Â£37 million) bailout of RBS and Lloyds in 2008 breached state-aid rules.
RBS now has four years to get rid of its branch network and insurance operations.
Stephen Hester, chief executive officer of RBS Group, said: "The agreement in principle reached with the EC is clearly more material for the structure of our group than we had hoped, increasing risk to both execution of the plan and earnings dilution.
"But this is still an acceptable result for RBS."
According to media reports, Santander and National Australia Bank are the two strongest contenders in the running to buy the 312 bank branches currently owned by RBS.
It is reported that the UK government will not sell the branches off to one of RBS's UK competitors as it wants to introduce new competition to the British financial sector.
By Asim Shah