Royal Bank of Scotland (RBS) is said to set up a £400m ($495.59m) compensation fund. This is said to be used to pay back some of the small businesses that suffered at the hands of its restructuring unit, the Global Restructuring Group (GRG).

The British bank, 73% of which is owned by the UK taxpayer, is said to announce this on Tuesday, before the market opens. While it is expected to admit that its GRG unit mishandled some small businesses, it is said to reject allegations that GRG tried to profit by taking advantage of struggling businesses, as recently reported.

It was said in October that RBS allegedly squeezed many small businesses by restructuring their deals and eventually purchasing their assets for cheap. In the so-called 'Project Dash for Cash', RBS's controversial turnaround division – GRG – would allegedly target companies by giving them low valuations, pushing them to default on loans. They would then be squeezed with interest rates and fees, which would force the sell-off of assets to clear loans. It was also alleged that RBS would purchase stakes in these businesses or push them into administration.

These allegations were then supported by documents, which confirmed that RBS staff was allowed to boost their bonuses by identifying firms that could be squeezed. Higher bonuses were awarded to staff that identified firms that could be restructured, or have their interest rates increased.

The Edinburgh, UK-based bank had refused these allegations earlier. However, it is now said to offer some of the businesses that were moved into GRG, a certain type of fee that they had earlier paid to RBS for its services.

Apart from RBS, the UK regulator, Financial Conduct Authority (FCA) is also expected to make a statement on this subject on Tuesday. It is expected to say that the steps taken by RBS are enough to avoid enforcement action, according to the Financial Times.

The FCA-instructed inquiry, known as a 166 report, is being led by consulting firm, Promontory Financial Group and audit firm Mazars. While this report was supposed to be published last year, it has been subject to delays.

While the move by RBS is said to be an attempt to draw a line under the long-running scandal, any compensation offered is expected to interest hundreds of small businesses who have threatened to sue RBS over its GRG unit's operations. In October, campaigners called on the bank to pay a minimum of £2bn to 50 affected businesses.