Royal Bank of Scotland may face a criminal investigation into whether it forced small companies to the wall in order to strip them of assets.

The UK’s Serious Fraud Office (SFO) is examining allegations that RBS engineered defaults in SMEs in order to buy their assets at knockdown prices. The allegations emerged on Monday, when a government advisor published a report into lending to SMEs.

Lawrence Tomlinson, entrepreneur in residence at the Department for Business, Innovation and Skills, said: "There are many devastating stories of how RBS has wrecked good businesses and the ruinous impact this has on the lives of the business owners.

"I look forward to seeing how RBS proposes to take forward the forensic investigation into this part of the bank."

The SFO is investigating whether RBS was involved criminal activity or whether the bank was engaging in lawful business practice, however unethical.

The Tomlinson report has been handed to the City watchdog and RBS is also conducting an internal investigation.

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