The Royal Bank of Scotland (RBS) could face losing up to £500 million after the collapse of a loan firm, it has been revealed.

According to news reports, the loan firm Cattles, had numerous errors on bad loans after admitted having a “breakdown in internal controls.”

As a result, Cattles had suspended members of senior staff and had issued profit warnings.

In its latest figures, Cattles is said to have an outstanding debt of £2.4 billion.

It is believed that RBS, the main lender for the loan firm hopes to recover the £500 million, yet according to experts, Cattles may not be able to meet its debt repayments.

As a result, RBS’s share, also the largest piece of the firms debt, is expected to be passed on to the taxpayer.

One expert said: "RBS isn't the only bank to have been caught up in the Cattles debacle. But it is the biggest and, since this looks like it will be yet another problem the bank will have to pass on to the taxpayer, it's another big dent in its reputation and its public image."