THE ROYAL Bank of Scotland is shutting its controversial bad debt division, leading to the departure of two senior staff members.

Derek Sach, the head of the Global Restructuring Group (GRG), and property chief Aubrey Adams are set to leave the bank next spring as part of the overhaul, staff have been told.

Laura Barlow, the bank's UK head of restructuring, will take over with immediate effect and continue the restructuring operations.

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The bailed-out bank's decision to scrap the unit comes just weeks after the Treasury Select Committee accused the firm's executives of being "wilfully obtuse" about whether the GRG unit was a profit centre.

The select committee is due to publish a report on the business after the summer.

Last year, entrepreneur and former government adviser Lawrence Tomlinson publically accused GRG of sending viable firms to the wall in order to generate returns for the bank.

A review commissioned by RBS and carried out by law firm Clifford Chance found that the bank had not systematically defrauded small companies, though chief executive Ross McEwan pledged to make changes to the business.

The Financial Conduct Authority is also looking into Mr Tomlinson's claims.

RBS has, since the start of the year, transferred some staff and distressed debts under GRG's remit into its internal "bad bank", named RBS Capital Resolution.

Staff working on GRG cases will continue doing so once Ms Barlow takes charge.

A company source said that with the economy improving, RBS was encountering fewer cases of distressed debt, lessening the need for a large turnaround unit.

In the aftermath of the financial crisis, GRG handled the debts of ­corporate giants including HMV, Liverpool Football Club and Peacocks.

Mr Sach has spent 22 years at RBS, while Mr Adams joined from property company Savills in 2011.

RBS declined to comment.