Britain's financial watchdog FSA will now examine the collapse of the Royal Bank of Scotland (RBS) in light of new revelations about the bank's ex-chief executive Sir Fred's secret affair with a senior colleague.

Reports are coming that shamed banker Fred Goodwin gave his lover two lucrative promotions when he was the ban's chief.

The banking regulator wants to confirm whether Fred Goodwin's secret affair contributed to the collapse of the bank.

The RBS' code of conduct obliges its employees to inform the bank's board about any such relationship, but neither Sir Fred nor his lover reported their relationship to the board.

Speaking on the topic, Member of Parliament John Hemming said, "The question about Fred Goodwin's management of RBS is whether it was managed in stakeholders' interests or run as a personal fiefdom."

RBS is currently 83 per cent is owned by the taxpayer. The bank was part-nationalized at the peak of financial crisis in 2008 at a cost of around £50 billion to the taxpayer and with a loss of as many as 20,000 jobs.