Sky News understands that Dame Alison, who was effectively forced to step down in July after acknowledging that she discussed the former UKIP leader Nigel Farage's private banking arrangements with a BBC journalist, is consulting lawyers on her legal options.

It was unclear whether she would mount a formal legal challenge if NatWest's board proceeds, as expected, with a decision to cancel about £5.2m of long-term share options she had accrued during her leadership of the bank.

However, one person close to the situation said it was among the options expected to be seriously considered by Dame Alison.

City sources said they anticipated a decision being reached by its directors in the coming days, although it was unclear whether that would happen ahead of its third-quarter results announcement on Friday morning.

NatWest had been keen to resolve the issue ahead of the results, as Sky News reported earlier this month, although the legal complexities associated with it meant there was a risk that the decision-making process could be prolonged.

It emerged on Tuesday - following a subject access request by Mr Farage - that NatWest employees had belittled the broadcaster and former politician, making a stream of pejorative comments about his views and finances.

Coutts' decision to 'debank' Mr Farage sparked a firestorm in Westminster and forced the City watchdog into an urgent review of the practice across Britain's banking sector.

On Tuesday night, neither Dame Alison nor her spokesman responded to a request for comment.

A NatWest spokesperson said: "In line with our previous commitments, the key findings of the independent review and the recommendations will be considered by the board.

"These, along with the group response, will be published in due course.

"In the meantime we will not comment on any speculation."

Read more business news:
Cap on bankers' bonuses to be abolished
UK unemployment rate remains low
Octopus lines up Zopa founder to chair EV arm

According to a public filing by NatWest in August, Dame Alison has been receiving her annual £2.4m package comprising base salary, pension contribution and a share-based fixed-pay allowance since her departure at the end of July.

She is also eligible to be considered for a pro rata portion of the £2.9m annual bonus and long-term share awards that made up the remainder of her total maximum pay package of £5.3m.

In addition, she holds roughly 2.5m unvested shares in NatWest, which at Tuesday's closing share price of 207.8p were worth £5.19m.

That amounts to a theoretical total of more than £10m, although the fact that Dame Alison left midway through 2023 means she would only have been eligible for just over half of the £2.9m in annual variable pay.

One source close to the process told Sky News earlier this month it was "inconceivable" that she would be awarded any discretionary pay for 2023, and said it was "highly likely" that the bank would seek to cancel the unvested shares, although they admitted that the latter move, if implemented, could become the subject of a legal challenge.

The government expects to be consulted on the final terms of her exit package.

Dame Alison left the bank by mutual consent - where she had been widely regarded to be doing a competent rebuilding job 15 years after its £45.5bn taxpayer bailout - after acknowledging that she had inaccurately briefed a BBC journalist about the reasons for closing Mr Farage's accounts.

The report, which the broadcaster was forced to amend, suggested that the former UKIP leader did not meet its commercial criteria.

It subsequently emerged after he submitted a subject access request that his political views had been instrumental in the decision.

Dame Alison has been replaced on an interim basis by Paul Thwaite, formerly the head of its commercial business.

A report compiled by the law firm Travers Smith examining the "exit process" for Mr Farage and the disclosure of information about his banking arrangements to the BBC was submitted to the NatWest board earlier this month.

A second phase of the probe, assessing the closure of Coutts accounts during the last two years, is due to be completed imminently.

Dame Alison, the first woman to run one of Britain's big four London-listed banks, had initially sought to draw a line under the row with Mr Farage by apologising to him, and then by foregoing her bonus for this year.

Within hours, however, signals from Downing Street that it had lost confidence in her leadership prompted the bank to convene an emergency board meeting to rubber-stamp her departure.

Sir Howard is due to step down next year and will be replaced by Rick Haythornthwaite, the former MasterCard chairman who currently chairs Ocado Group, the online grocer.