As a damage limitation exercise, it ranks alongside Rupert Murdoch's shock closure of disgraced tabloid the News of the World in 2011.

The Royal Bank of Scotland has told staff that its Global Restructuring Group (GRG), which stands accused of destroying viable UK businesses for profit, is being dissolved with immediate effect.

The move has been widely interpreted as designed to dampen criticism of GRG, which reached a crescendo over claims that its long-term leader, Derek Sach, and Chris Sullivan, RBS's deputy chief executive, had been "wilfully obtuse" - an apparent euphemism - to the Treasury Select Committee in June. The pair had insisted GRG was not a profit centre (part of a company treated as a separate unit), a claim Sullivan later admitted was untrue.

On August 8, RBS also announced that Sach, who has run GRG for 22 years, and former Savills chief executive Aubrey Adams, who has lead RBS's no less controversial West Register property arm for three years, were leaving the bank. The bank said it was promoting Helen Barlow, who has run GRG in the UK for five years, to take Sach's place. Before joining RBS in 2009, Barlow worked for the accountants Andersen and ran the UK arm of turnaround firm AlixPartners.

Business people who have suffered at GRG's hands were both perplexed and underwhelmed by RBS's decision to axe the unit. Neil Mitchell, who is pursuing a claim against RBS after, in 2007, it allegedly defrauded shareholders and bondholders in the AIM-listed software company Torex Retail where he was chief executive, said: "They're closing it without a fight, without even waiting for the outcomes of the Financial Conduct Authority, Serious Fraud Office and HM Revenue & Customs investigations."

Glasgow-based James Montgomery, who alleges that GRG floored his property business by manipulating valuations, said: "They're closing the stable door after the horse has bolted. The damage has already been done - both to the SME market and, probably irreparably, to the RBS brand."

Clayton Perks, founder of Glasgow Chiropractic, which claims GRG conspired to sabotage his business after RBS missold him swaps that drained £661,000 out of his companies, said: "The dirty work will continue behind closed doors."

RBS won't comment on the closure but it is understood GRG's operations and portfolio of non-performing loans are being transferred into the RBS Capital Resolution Group, an internal "bad bank" that RBS launched in January following a Treasury-led probe into the efficacy of its good bank/bad bank split. RCR, as it is known internally, is led by Rory Cullinan, RBS's head of equity finance under Fred Goodwin between 2001 and 2005 who re-joined the bank to oversee the dismantlement of RBS's non-core division in 2009.

Professional advisers are sceptical that the closure will make much difference. Alison Loveday, senior partner of Manchester-based law firm Berg, which is representing scores of business people who claim their firms were destroyed by GRG's actions, does not believe the closure of GRG will block the pipeline of civil litigation against RBS.

"It looks to me like this is a simple case of RBS jumping before they were pushed. None of this undoes the damage that's been done to a great many businesses."

Insolvency lawyer James Nicholls, former managing partner of Birmingham-based Nicholls & Co, said: "This is largely window dressing. If RBS was serious about cleaning up its act in recovery and restructuring, it would be bringing in a new broom from outside."

Jon Welsby of specialist advisory firm Insolvency Assist, said he was concerned GRG's closure will make matters worse for many of his clients.

"The closure could be a nightmare for insolvent claims and those that are on the edge. I'm particularly concerned for businesses whose accounts show 'excessive' charges and interest rate hedging product payments averaging 200% of the loan value. Valuations will be shot to pieces and scope for refinancing is nil."

The GRG and West Register scandals date back to 1992 when, in the wake of the UK property crisis of 1990-91, the bank hired Sach from 3i and asked him to turn its restructuring and recovery division into a profit centre.

Over the next 16 years, and especially in the early 1990s, things went relatively smoothly for Sach though there were occasional rumblings of discontent from some customers, generally arising from perceived conflicts of interest between West Register (a property developer and property investment vehicle established by the bank in 1992) and the bank's property customers.

However these were just the hors d'oeuvres in a banquet of alleged misconduct that has since overwhelmed RBS and GRG. In July 2008, aware that the financial crisis and acquisition of ABN Amro had blown a massive hole in its balance sheet and that a £12 billion rights issue was not enough to undo the damage, the bank is alleged to have opted to turn the screws on its own business borrowers.

In August 2008, GRG staff were told they would have to become more aggressive - bumping up fees, forcing clients into new terms and agreements, and seizing equity stakes in customer firms, according to a GRG whistleblower who appeared on Channel 4 News.

Asked by the programme's Siobhan Kennedy what these new fees were for, the whistleblower said: "Nothing really. The fees were just there to make sure [firms] were pushed to the brink."

The whistleblower added that GRG took complete control over customers' accounts and was not answerable to any other part of the bank. He added that shifting customers' assets into West Register was firmly on the agenda.

RBS has consistently denied anything like this happened and insists GRG has always been dedicated to restoring troubled business customers to health, even though Chairman Sir Philip Hampton has admitted it may have been a bit "heavy-handed" in some instances just because of the sheer volume of companies that passed through GRG in the wake of the crisis. GRG's alleged activities remained below the radar for several years after RBS was bailed out with £45.5bn of UK taxpayers' money. It won kudos for successes such as the rescue of larger delinquent borrowers including Thomas Cook and Samsonite.

However, the floodgates of negative publicity opened last November when Leeds-based entrepreneur Lawrence Tomlinson published a highly critical report for Vince Cable at the Department for Business Innovation & Skills, where he was "entrepreneur in residence".

Tomlinson accused RBS of taking down viable businesses by withdrawing funding, turning overdrafts into loans, reneging or altering lending agreements and getting friendly chartered surveyors to produce "lowball" valuations of property assets. In some cases, Tomlinson said no breach was even cited. The bank just took a dislike to the business or its sector.

Tomlinson said that GRG staff were "incentivised to asset strip" and that many firms ended up being put into administration, though the bank claims this fate only awaited 10% of GRG customers. Tomlinson said directors of firms transferred there were scared of speaking out for fear of worse treatment afterwards, causing him to mask the identities of the 23 case studies in his report. In the report, Tomlinson wrote: "Once in this part of the bank, the business is trapped with no ability to move or opportunity to trade out of the position. They are forced to stand by and watch an otherwise successful business be sunk by the decisions of the bank."

The Manchester lawyer Loveday added that matters were made worse because RBS seemed to have recruited some "exceptionally nasty" people to work in GRG. "Some of our clients would say they were dealing with sadists," she said.

When the report was published in November, Hampton dismissed it as full of "anecdotal, unsubstantiated allegations", while the bank commissioned law firm, Clifford Chance, a member of RBS's panel of legal advisers, to produce an "independent" review of the claims.

When it reported in April, RBS said it had found "no evidence" to support "Tomlinson's core allegation" that the bank had set out to defraud business customers. However, a close reading of the report suggested the top City legal firm was, inadvertently or otherwise, corroborating some of Tomlinson's key claims, especially where the arbitrariness of fee structures and valuations was concerned.

In November, the Financial Conduct Authority confirmed it was launching a "skilled persons report" into the alleged malpractice under section 166 of the Financial Services and Markets Act 2000 and later said Promontory Financial Group and accountancy firm Mazars would lead the probe. The Serious Fraud Office also commenced inquiries.

Unsurprisingly, given the number of UK companies that have been affected by the scandal, the GRG affair became a cause celebre for the bank and a running sore for New Zealander Ross McEwan, who took over as RBS chief executive in October 2013.

McEwan was ambushed by a caller on a phone-in show with London-based radio show LBC last month. The caller, "Sarah", asked how GRG staff could "morally" be given bonuses "after causing so much emotional and financial harm".

McEwan responded by insisting his turnaround team was a "pretty good unit" adding that "I have not seen malicious or fraudulent activity going on in the business". When it emerged just weeks later that GRG staff were being handed £17m in bonuses, social media was bombarded with messages from incredulous victims of the bank.

"The important issue here is whether RBS is now, and is seen to be, acting in the long-term interests of its shareholders and SME customers," said Treasury Select Committee chairman Andrew Tyrie MP earlier this month. He added that RBS still had a "long way to go" to improve the way it serves its customers. However, the affair has arguably been a boon to other UK banks, some of which have behaved no better in the restructuring and recovery space.

"Because the spotlight has been shining on GRG, other banks have escaped scrutiny," said Loveday. "We've got a number of cases against Barclays and Lloyds, where the behaviour is very, very similar to that of GRG."

Lloyds has cannily offloaded some sizeable parcels of troubled assets to the New York-based private equity house Cerberus Capital Management. Loveday said this means it is effectively outsourcing GRG-type activities, making it less likely to take any flak.

"These disposals enable Lloyds to say 'don't we treat businesses well?'" she said.

The fact that such presentation-led moves on behalf of Britain's banks can be presented as good treatment suggests how low the bar has been set in recent years.

Ian Fraser's book Shredded: Inside RBS The Bank That Broke Britain has been longlisted for the FT & McKinsey Business Book of the Year Award.