Royal Bank of Scotland said the bank and its former bosses may have made bad decisions but that does not mean they misled investors or acted illegally.

A statement outlining its case was issued last night as the bank prepared to lodge its defence against a £4 billion lawsuit from shareholders.

The Royal Bank of Scotland Shareholder Action Group is suing the bank and four ex-directors on behalf of institutions and private shareholders, alleging they were misled over the bank's strength in a rights issue prospectus months before RBS almost collapsed.

Fred Goodwin, the disgraced former RBS chief executive ousted at the time of the Government bailout, is among directors accused.

"While RBS and its former directors made some business decisions that have been criticised, this does not mean that they misled investors or acted illegally," RBS said in a statement.

"We believe we have strong defences to the claims that are being brought against the group and that is why we intend to defend these vigorously."