Royal Bank of Scotland could lose as much as £500 million through its exposure to troubled consumer loans firm Cattles, it has been reported.
RBS is understood to be the lead lender to Cattles, which has warned of significant losses following revelations of accounting errors.
The bank still hopes to recover the money, according to the Sunday Telegraph, but experts believe the company is unlikely to be able to meet its debt obligations.
It is understood that RBS, which is largely State owned, has the largest slice of Cattles' bank debt and its share is now expected to be passed on to the taxpayer.
A spokesman for RBS said he was not able to comment on the situation.
Other companies in the 22-bank consortium of Cattles' lenders are thought to include HSBC, Barclays and Lloyds Banking Group.
Cattles serves individuals who may not have access to mainstream lending.
The firm, which trades as Welcome Finance, had £2.6 billion of borrowings when it posted its last trading figures in December.
But the sub-prime lender is understood to be seeking waivers from its banks after admitting it may be in breach of borrowing covenants.
Cattles suspended another three directors earlier this month after admitting a "breakdown in internal controls" had led to accounting policies on bad loans being applied incorrectly.
