Royal Bank of Scotland will face a review of its small business lending by a City watchdog-appointed investigator following allegations of “unscrupulous” practices at the state-backed group.

The Financial Conduct Authority (FCA) said it was also asking all major high street banks to look at their treatment of small firms after an explosive report earlier this week by businessman Lawrence Tomlinson.

The FCA said it would hire an independent person to review the accusations made against RBS in the report, with an appointment expected within the next week.

It could launch a full enforcement probe following the results of the review.

The regulator has also written to other major lenders “seeking confirmation that they are satisfied they do not engage in any of the poor practices” alleged in the report by Mr Tomlinson.

Its action also comes after a critical review of small business lending by former bank of England governor Sir Andrew Large, who was appointed by RBS to conduct an independent inquiry.

Mr Tomlinson’s report claimed he had uncovered a dossier of evidence alleging that RBS deliberately forced companies into default to seize their properties, while practices at other banks were also criticised.

Clive Adamson, director of supervision at the FCA, said: “These allegations, if proved, raise serious concerns about how banks treat their customers.

“An SME’s relationship with its bank is essential for any business to have a chance to succeed, and claims like the ones made threaten to undermine that.”