THE chairman of state-backed Royal Bank of Scotland has apologised after admitting it provided incorrect evidence to MPs investigating claims that it mistreated small business customers.

Sir Philip Hampton said that executives giving evidence to the Treasury Select Committee had made an "honest mistake" when being asked about the activities of the lender's controversial Global Restructuring Group (GRG).

RBS - which is 80 per cent owned by the taxpayer - was facing claims that it pushed small firms towards collapse so it could buy back their assets at rock-bottom prices.

Committee chairman Andrew Tyrie said earlier this year that the bank had appeared "wilfully obtuse" after it challenged the description of GRG in a report as a "profit centre" - following evidence from two executives, Chris Sullivan and Derek Sach.

Sir Philip responded in a letter in August, published over the weekend.

He said: "The evidence the bank's representatives provided was not correct in answering the question as to whether GRG was a profit centre.

"This lack of clarity on an important point is very disappointing to the committee as it is to me and I apologise for it."

Mr Tyrie said: "Anybody can make a simple mistake in their evidence. But this was more than that - it was materially incorrect on a crucial point and unacceptable. RBS has done the right thing and apologised."

Royal Bank of Scotland said earlier this year that a review by law firm Clifford Chance had found no evidence that it set out to defraud small business customers.

It is the latest embarrassment for RBS after last week admitting it had got its sums wrong over a stress test by European regulators to see if lenders could withstand another major financial crisis.

That came just a day after RBS was fined £56m by UK regulators over an IT meltdown in 2012 and a week after being hit with penalties of £399m over its role in manipulating foreign exchange markets.