Mr Goodwin was informed of the decision by the head of the Civil Service, Sir Bob Kerslake, after the annulment was ratified by the Queen. Sources at the Cabinet Office said Mr Goodwin had told Sir Bob he "expected it would happen" and described the conversation as "short" but "amicable".
But last night some senior MPs and banking industry insiders expressed unease that Mr Goodwin was being made a scapegoat for the credit crunch of 2008. "There are far more people involved in the causes of the financial crisis than just Fred Goodwin," said the Labour MP John Mann, who questioned Mr Goodwin when he appeared before the Treasury Select Committee in 2009. "If this is the way we are going we should not just be looking at him, we should be looking at other senior bankers and regulators," Mr Mann said.
A senior banking industry representative added: "It does seem a little bit intemperate. People have been to prison and have knighthoods but they have taken Goodwin's off him. We appear to be bowing to the mob."
The Cabinet Office said the knighthood – awarded to Mr Goodwin in 2004 for services to banking – was removed on the Forfeiture Committee's advice because Mr Goodwin had brought the honours system "into disrepute". It said his record as chief executive of RBS, which had to be bailed out by taxpayers in 2008, meant it was "an exceptional case" so normal rules about removing knighthoods did not need to be followed.
Honours cannot normally be withdrawn unless a recipient has been jailed for more than three months, or is struck off by professional or regulatory authorities for actions directly relevant to their granting. But the Cabinet Office said: "In 2008, the Government had to provide £20bn of new equity to recapitalise RBS and ensure its survival and prevent the collapse of confidence in the British banking system. Subsequent increases in government capital have brought the total necessary injection of taxpayers' money into RBS to £45.5bn.
"Both the Financial Services Authority and Treasury Select Committee are clear that the failure of RBS played an important role in the financial crisis of 2008-09 which, together with other macro-economic factors, triggered the worst recession in the UK since the Second World War and imposed significant direct costs on British taxpayers and businesses. Fred Goodwin was the dominant decision-maker at RBS at the time."
Mr Goodwin, now 53, was forced to stand down as chief executive and take early retirement in October 2008 after the bank had to be bailed out.
Although the Forfeiture Committee is made up of senior civil servants, Mr Goodwin's fate was sealed when David Cameron called for the knighthood to be taken away. Speaking yesterday Mr Cameron said: "The FSA report into what went wrong at RBS made clear where the failures lay and who was responsible. The proper process has been followed and I think we've ended up with the right decision." The Labour leader Ed Miliband said: "I think it's only the start of the change we need in our boardrooms. We need to change the bonus culture and we need real responsibility right across the board."
Others who have been stripped of their honours include the spy Anthony Blunt and the former Romanian dictator Nicolae Ceausescu.
If Fred's lost his... Controversial honorees
The removal of Fred Goodwin's knighthood has alerted the nation to the existence of a previously hidden Honours Forfeiture Committee, and made people think of others besides the ex-head of RBS to whom this committee should turn its attention. However, while it is possible in law to strip some people of their honours, others are untouchable, such as members of the House of Lords under rules successive governments have been strangely reluctant to change. Here are a few people who might qualify for the Goodwin treatment, if the will was there:
Sir Clive Thompson
Some 150,000 families on low incomes had Christmas ruined when the savings club Farepak collapsed in 2006. They each lost about £400. The chairman of Farepak's parent company was the ostentatiously rich Sir Clive, who was knighted in 1996 for services to industry. He is facing possible disqualification as a company director because of the scandal.
Sir Victor Blank
Knighted in 1999 for services to the financial industry, Sir Victor took over Lloyds TSB in 2006 and secured the largest deal in the bank's history when it merged with HBOS. He steered the new company to the verge of bankruptcy, before it was rescued by the taxpayer in a £17bn bailout.
Sir Mervyn King
The Governor of the Bank of England was warned in August 2007, a month before everyone else, that Northern Rock had serious problems, but did nothing to prevent the first run on a British bank in decades. He then "panicked", according to angry MPs, yet stayed in his job and last year picked up a knighthood.
Sir Callum McCarthy
Sir Callum was chairman of the Financial Services Authority – the chief regulator of the banks – from 2003 to 2008, and moved to a senior job in the Treasury just before the start of the crisis he had failed to avert or foresee. He was knighted for services to the finance sector in 2005.
Sir Mark Thatcher
The former Prime Minister's son inherited his baronetcy from his father, who was rewarded for being a loyal consort. If a lifetime of acting like a spoilt brat does not qualify him to have his knighthood taken away, his involvement in the failed "Wonga" coup in Equatorial Guinea in 2004 and other strange deals surely does.
Lord Taylor of Warwick
No sooner was the former Tory peer out of prison, after serving four months of a one-year sentence for fiddling his expenses than he boldly announced his intention to resume his seat. Other peers have made it plain that he is not welcome, but he retains his title.
Lord Archer of Weston-super-Mare
The millionaire writer and former Tory activist has not set foot in the Lords since he received a four-year jail sentence in 2001 for perjury, but his title is not affected.
Baroness Uddin of Bethnal Green
Pola Uddin had her membership of the House of Lords suspended for 18 months in October 2010 and was ordered to pay back £150,000 in expenses she should never have claimed. But she will be able to return to the Lords later this year.
...and those who have lost honours before
Others who have been stripped of their titles include the financier Jack Lyons, jockey Lester Piggott, boxer Naseem Hamed, Soviet spies Anthony Blunt and Kim Philby, cricket tycoon Allen Stanford, and the dictators Benito Mussolini, Nicolae Ceausescu and Robert Mugabe.
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