"This would be a flagrant breach of the purported arms-length relationship between the Treasury and the Royal Bank of Scotland."
Court papers published yesterday reveal that the government had “day-to-day” involvement and “strategic” control over RBS’ troubled GRG division.
The papers indicate that senior Treasury officials had influence over the controversial business support group, which came under fire in 2013 over reports it mistreated struggling businesses to profit from their financial hardship.
A subsequent FCA review found 'widespread and systematic' mistreatment of SME customers in the division.
Documents from government's Asset Protection Agency show that it influenced GRG's strategy and effectively prevented customers from existing GRG by prohibiting the bank from releasing customers from their loans.
Court evidence also appears to show that the Agency told RBS to withdraw customer support.
The All-Party Parliamentary Group on Fair Business Banking described the allegations as "extremely serious" and called for a thorough investigation into the relationship between the Treasury and RBS.
Kevin Hollinrake MP, co-chair of the APPG on Fair Business Banking, said: “These are very serious allegations and raise important questions about the relationship between the government and the banks during and after the financial crisis. This would be a flagrant breach of the purported arms-length relationship between the Treasury and the Royal Bank of Scotland.
"These allegations must be robustly investigated and anyone found guilty of wrongdoing should be held to account. It goes without saying that any victims should be fully compensated. If there is any substance to these claims it will only add to the calls for a full public inquiry into this and other UK banking scandals.”
In a statement, RBS said: “The FCA has confirmed its independent review found no evidence that RBS artificially distressed and transferred otherwise viable SME businesses to GRG to profit from their restructuring or insolvency. Nor did it identify any cases where the purchase of a property by West Register alone gave rise to a financial loss to the customer.”
A Treasury spokesperson told Financial Reporter than "no claim has been brought against HM Treasury", adding that in its review, the FCA said it had "not seen evidence … where the existence of the APS had an effect on how RBS approached the customer”.