Both banks will not pay cash bonuses for 2009 to staff earning more than $63,000 per year as part of the deal, which will see the UK Treasury pump a further $42 billion into RBS and another $34 billion into Lloyds.
The move will bring the government stake in RBS up to 84 per cent but Lloyds intends to escape state control with a rights issue that it hopes will bring in $22 billion.
It will also raise funds through $12 billion worth of exchange offers.
After a European Commission ruling both RBS and Lloyds are being forced to sell off some sections of their financial services operations.
RBS is to lose its bank branches and insurance division, while Lloyds must get rid of its Scottish bank branches and several other assets, including its online Intelligent Finance business.
Earlier this week, Lloyds made $383 million after it sold its Insight Investment Management company to Bank of New York Mellon.
By Gary Cooper