British taxpayers risk losing their entire £45bn stake in Royal Bank of Scotland (RBS) which is in grave danger of failing within 10 years, according to an explosive new book.

A new study of the disgraced bank, which brought the UK to the brink of financial ruin, reveals RBS still has a £100bn “black hole” in its finances due to “five broad areas of alleged criminality and wrongdoing”.

They include the mis-selling of financial products such as payment protection insurance, the alleged duping of investors who were persuaded to plough more than £12bn into RBS shares just before the banking crash in 2008, further fallout from the Libor scandal, and current criminal investigations into the manipulation of the £3trn-a-day foreign exchange markets.

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Shredded: Inside RBS, The Bank That Broke Britain, by the financial journalist Ian Fraser, concludes that the governments led by Gordon Brown and David Cameron have “let the people of Britain down” by failing to reform RBS after it received its mammoth bailout under the stewardship of former chief executive Fred “The Shred” Goodwin.

“The result has been that, at the time of writing, RBS is probably a worse bank than it was under Fred Goodwin,” Fraser said. “If the right moves are now made, RBS could become a great bank again. If they’re not, I doubt it will even exist in 10 years’ time.

“Whatever happens, it now seems impossible that British taxpayers will ever see a return on their £45.5bn investment in the bank,” he writes in the book.

Fraser analyses the bank’s extraordinary largesse under Goodwin, whom, he claims, squandered billions of pounds on overpriced acquisitions, fleets of Mercedes and extravagant buildings and decor.

The book also claims that Goodwin and his wife, Joyce, avoided tens of thousands of pounds in personal tax liabilities over their repeated use of a controversial £20m private jet bought by RBS in 2002.

Fraser says the Goodwins’ excessive trips on the Dassault Falcon 900EX executive jet led Her Majesty’s Revenue and Customs to conclude that it should be taxed as a “benefit in kind”.

Fraser writes :“To avoid this, ex-insiders claim the bank transferred ownership of the corporate jet from the Royal Bank of Scotland Group to RBS’s Lombard Aviation leasing subsidiary. This gave the impression that the Falcon 900EX was not just a personal plaything and dedicated air taxi for the chief executive, but was chartered out to third parties on a regular basis.”

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The book claims “most senior RBS executives dreaded going on the plane with Goodwin because of his lack of social skills”. The plane was configured to include a bedroom for Goodwin, which caused a few problems for his co-passengers on long-distance flights, it is claimed.

“Executives who did travel overnight with Goodwin were obliged to sit up all night while Fred reclined in regal splendour in his bedroom aft,” Fraser writes. “The arrangement was a double inconvenience since, once Goodwin had gone to bed, the plane’s only toilet became inaccessible, because you had to pass through his private suite to reach it. ‘We’d be sitting there cross-legged all night,’ said one.”

According to Fraser, former RBS chairman George Mathewson “almost had to plead” with Goodwin to have use of the jet, which had a maximum range of more than 5,000 miles, meaning it could comfortably fly non-stop from RBS headquarters in Edinburgh to Beijing and almost anywhere in the United States.

The book claims the RBS lavished vast amounts of its shareholders’ money to support the lifestyles of its top executives.

One acquaintance is quoted as saying: “Fred wanted to live like Aristotle Onassis on other people’s money.”

Fraser quotes one former RBS insider who criticised the amount of money the bank spent on sponsorship of motor sport. “The amounts of money that were wasted on Formula One were shocking,” he said. “The bank spent about £28m in the first year of the Williams sponsorship.

“There was no logic to it at all – it was just a vanity thing for Fred and because he liked motor sport.

However, Fraser claims the “true villains of the piece” are the “politicians, central bankers, regulators and the Basel Committee on Banking Supervision” who allowed people like Goodwin believe they could “get away with virtually anything, whilst defying financial gravity and existing above the law”.

Fraser writes: “Morality and ethics were thrown out the window and we saw the mis-selling of rip-off products on an epic scale – including the scandals of payment protection insurance and interest-rate swap agreements sold to small- and medium-sized enterprises.

“The Treasury, the FSA [Financial Services Authority] and the Bank of England all turned a deaf ear to the complaints from the banks’ millions of ‘victims’ and paid scant heed to the overall balance-sheet strength – capital, liquidity and asset quality – of British banks.

“And, at various stages between 1988 and 2008, British politicians also outsourced critical aspects of banking regulation and supervision to the private sector body, the Basel Committee on Banking Supervision, which enabled the bankers to write their own rules. That, in itself, was an error easily as bad as any committed by Goodwin. So he is right. We can’t just blame it all on him.”

Shredded claims the culture at RBS is still as “poisonous” as ever, and quotes one City expert who claims the bank was manipulating its finances in 2012 in order to give the impression it could be returned to private ownership.

Tim Bush, head of governance and financial analysis at corporate governance watchdog Pensions and Investments Research Consultants is reported to have told Fraser: “My analysis was that RBS was aggressively puffing all the numbers in the hope of a quick and dirty sale.” Fraser said Bush’s view was confirmed in June 2013 when regulator the Prudential Regulation Authority identified a further £13.6bn capital black hole at RBS.

Fraser paints a bleak picture for the future of Britain’s biggest bank and, as a result, the UK economy.

He concludes: “If there is to be one lesson from the RBS catastrophe from an internal company perspective, it is that Britain’s much vaunted system of corporate governance is broken and is in need of an urgent overhaul.”