Bank of England governor says that, if true, claims bank deliberately wrecked small businesses would be 'fundamental violation' of integrity of banking relationship

Mark Carney has described as "deeply troubling and extremely serious" allegations that Royal Bank of Scotland has been deliberately wrecking small businesses to make a profit.

The Bank of England governor told MPs on the Treasury select committee that if the claims about the bailed out institution proved to be true "this behaviour is a fundamental violation of the integrity of the banking relationship".

The committee's chairman, Andrew Tyrie, expressed surprise when told by Carney that he had only learned about the allegations recently from Sir Andrew Large, a former deputy governor of the Bank of England who issued a report on RBS lending to small businesses this week.

Large's study recommended RBS investigate damaging claims – also published this week – that the bank was forcing firms into administration and then acquiring their properties at bargain prices.

Tyrie said: "We as MPs have been inundated with complaints about this for years … but told that this was not so, there were no supply constraints, that customers were being treated reasonably."

He added: "Don't you think it's shocking that these manifest weaknesses and maltreatment of RBS customers had not been picked up much earlier by somebody?"

Carney responded that if the behaviour turned out to be widespread at the bank it was indeed "remarkable" and "shocking" that it had not been identified sooner by the RBS board, regulators, or UKFI, which manages the government's stakes in both RBS and fellow state-backed bank Lloyds Banking Group.

He also conceded it was a failure of governance at a time when governance issues had supposedly been addressed in the wake of the financial crisis.

Large's report recommended that the bank investigate claims published this week by an adviser to business secretary Vince Cable, entrepreneur Lawrence Tomlinson, that RBS was killing off small, viable businesses to make a profit.

Tomlinson is accusing RBS of forcing businesses into its Global Restructuring Group (GRG) which sells on properties to its West Register division. GRG decides whether a business is beyond turnaround and needs to be put into administration, a process which Large described in his report as "opaque".

Carney said that the task of investigating the allegations was the direct responsibility of the City watchdog, the Financial Conduct Authority, and not the central bank itself. However, he said he did not want to downplay a matter that must be pursued "down to the fullest extent of the law". He added: "We take the view that the behaviours documented in the report [and in a separate report from Sir Andrew Large] are deeply troubling and extremely serious."

He rejected the notion that banks might have been tempted into "a grey area of banking" by a requirement to hold more capital to protect themselves against the impact of future potential crises, arguing there was no justification for "predatory restructuring".

"There was a need for a number of institutions including RBS to reduce the size of their balance sheet but the big material areas where balance sheet reduction could make the biggest difference were concentrated on their investment banking and international activities as opposed to their core UK activities.

"We welcome the renewed focus of the new RBS senior management on its core retail and UK commercial business. Now they'll have to prove that they can execute that strategy but at least they appear to be concentrated on the right things."

He said that while the accusations were serious, such behaviour by RBS was unlikely to have an impact on overall productivity in the UK.

The governor, who succeeded Sir Mervyn King in July, attended the session with colleagues from the Bank's rate-setting Monetary Policy Committee to answer questions based on themes raised in the November Inflation Report.

When asked whether the RBS allegations were an example of why during the crisis the Bank should have targeted monetary stimulus directly at businesses and not just through the purchase of government bonds, he said: "I wasn't here so I don't want to make judgments. There are certainly circumstances that one can imagine and we may have seen across the major economies in the course of this crisis where credit-easing type policies would have been particularly effective."