Fears for thousands of jobs as Barclays agrees merger to create world's fifth largest bank

The bankers most at risk are those earning six-figure bonuses at offices in the City, where ABN Amro's investment arm is based, and Canary Wharf, home of Barclays Capital.

Barclays' London headquarters will also shut and be moved to Amsterdam, losing hundreds more jobs from the City. Many of the jobs to go in the merger will be re-located to India.

The new bank, which will be called Barclays Group, will be among the top five investment banks in the world. The £45 billion deal would create Britain's second biggest banking group after HSBC.

But it still hangs in the balance, with the prospect of the Royal Bank of Scotland group tabling a rival bid which could lead to a hostile takeover of ABN Amro.

The Barclays deal will mean the loss of around 12,800 posts worldwide out of the combined staff of 217,000.

The merged bank will have its headquarters in Amsterdam but will be regulated by London's Financial Services Authority. Barclays bosses will get five of the top executive jobs at the bank.

Earlier today Barclays and ABN Amro have said they had agreed to merge in a deal.

The tie-up would see Barclays shareholders own a 52 per cent stake in the new business, which will be called Barclays but headquartered in Amsterdam.

Royal Bank of Scotland has been working on possible counter-deal in conjunction with Spain's Santander and Fortis of Belgium.

Today's agreement, which follows a month of talks involving Barclays and ABN Amro, values the Dutch bank at around 90 billion dollars (£45 billion). It is also reportedly the world's biggest ever financial services takeover.

The proposed merger is expected to complete during the fourth quarter of this year, with Barclays chief executive John Varley set to lead the combined group.

Mr Varley said the proposed merger represented a "unique opportunity" to create a new force in financial services.

He added: "Our combined geographic reach will ensure exposure to both developed and high growth developing economies."

ABN Amro separately announced today that it was selling its Chicago-based banking business LaSalle to Bank of America for 21 billion dollars (£10.5 billion).

That is a potential blow to Royal Bank of Scotland, which had hoped to pick up LaSalle as part of its rival takeover move for ABN Amro. As well as LaSalle, Santander wanted ABN Amro's Italian and Brazilian divisions, with Fortis taking ABN's retail banking operations in Holland and Belgium.

If today's merger is concluded, it would see Barclays become the UK's second biggest bank - overtaking Royal Bank of Scotland - and the fifth biggest banking group in the world behind Citigroup, Bank of America, HSBC and the Industrial and Commercial Bank of China.