The Royal Bank of Scotland has hired a law firm to investigate allegations the bank deliberately drove small businesses to collapse for its own gain.
The claims are contained in a dossier, compiled by government adviser Lawrence Tomlinson, which has now been passed to City regulators by Business Secretary Vince Cable, as Sky News revealed at the weekend.
The report suggests RBS - the largest lender in the UK to small firms - drove businesses to collapse so it could buy back their assets at rock-bottom prices.
Chancellor George Osborne has described the allegations as "shocking", but small business campaigners say anecdotal evidence suggests the practice was widespread.
A spokeswoman for RBS - 80% owned by the taxpayer - confirmed that it had now hired law firm Clifford Chance to look into the claims.
Mr Cable referred the claims to City watchdogs
Mr Tomlinson, who has been compiling the report independently for the past six months, focuses allegations on the turnaround division at RBS - its Global Restructuring Group (GRG).
The division handles loans classed as being risky and is understood to have the power to scrap loan deals, impose inflated interest rates and charge hefty penalties.
But the report alleges that firms not necessarily in immediate financial distress are "engineered" into GRG, sometimes through small technical breaches of loan terms, such as late filing of minor financial information.
They are then hit with exorbitant rates and fees, which in some cases cause them to collapse, allowing RBS to buy their property and assets on the cheap for the benefit of its West Register property arm, according to Mr Tomlinson.
His report claims that fees charged by GRG can run into hundreds of thousands of pounds.
One business that submitted evidence to Mr Tomlinson said that it forked out £256,000 in fees alone while in GRG.
Another said that RBS made them pay an immediate sum of £40,000 to continue borrowing terms with the group.
Mr Tomlinson said he was calling for "immediate action to stop this unscrupulous treatment of businesses".
He told Sky News: The main conclusion you could come to out of this is RBS was doing this for their own gain ... they just ended up with properties quite cheap and they'd made a lot of fees and extra interest while the business was on its way down."
In response, RBS said it was "already committed" to an inquiry on how it treats small firms, following recommendations by Sir Andrew Large whose separate report released on Monday highlighted a potential conflict of interest in the bank's business lending activities.
Sir Andrew, the former deputy governor of the Bank of England, also found that RBS failed to understand even the basic needs of its small business customers.
An RBS spokesman responded to the Tomlinson report by saying that GRG's role was key to helping the bank face up to its commercial property "mistakes" made in the run-up to the financial crisis.
RBS is the largest lender in the UK to small firms
He said: "In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy.
"RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.
"GRG successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives.
"Not all businesses that encounter serious financial trouble can be saved."
The report found a "disproportionately high" number of complaints against RBS, but also hinted at similar practices at other banks.
Fellow part-nationalised Lloyds Banking Group was also accused of concentrating on short-term gain at the expense of its business customers but the bank was angered by its inclusion in the dossier - suggesting there was no basis for such a claim.
Its statement said: "The specific practices discussed in the report are attributed to another bank and are not a reflection of Lloyds Banking Group's approach."
The report said Santander UK was among a few banks that were praised by small business customers for their treatment."
However, the campaign group Bully-Banks - which lobbies on behalf of small and medium-sized firms - claimed the behaviour of the wider banking sector was damaging the UK's economic recovery.
Its director, Jeremy Roe, told Sky News: "All of the major high street banks have major issues with the way they have conducted themselves.
"It is the bank's attitude to this sector that is a major cause of concern."