London (CNN) -- The former boss of the Royal Bank of Scotland, Fred Goodwin, is to be stripped of his knighthood, the British government said Tuesday, amid wide anger in Britain over bankers' bonuses.
Goodwin was awarded the knighthood for "services to banking" in 2004, under the previous Labour government.
RBS had to be bailed out by the government in 2008 after it suffered a record loss and has since cut thousands of jobs.
Goodwin, then chief executive, led the bank into the costly acquisitions that proved its downfall. After the government's multibillion-pound bailout, he retired with a huge pension deal.
The decision to annul his knighthood was taken on the basis that Goodwin "had brought the honours system in to disrepute," the Cabinet Office said in a written statement.
"The scale and severity of the impact of his actions as CEO of RBS made this an exceptional case," it said.
Goodwin become popularly known as "Fred the Shred" for his management style while head of RBS and was the focus of much public outrage over his handling of the crisis.
It is unusual for anyone to be stripped of a knighthood, an honor conferred by Queen Elizabeth II.
Previous cases include that of Jack Lyons, a prominent businessman who made extensive charitable donations but was convicted of fraud in the late 1980s, and Anthony Blunt, who lost his knighthood in 1980 after he was revealed to be a member of a spy ring.
Terence Lewis forfeited his knighthood in 1993, after he was convicted of corruption in Australia.
More recently, financier Allen Stanford had his knighthood rescinded by the Caribbean nation of Antigua and Barbuda, which is part of the Commonwealth, after he was investigated for fraud.
The decision to strip Goodwin of his knighthood comes against a backdrop of public anger over the pay and bonus offered to current RBS chief executive Stephen Hester. He decided to waive the bonus over the weekend after coming under heavy political pressure.
The British government, which has been imposing a program of public sector cuts and austerity measures, owns an 83% share in RBS.
The government has injected a total of £45.5 billion ($70.6 billion) of taxpayers' money into RBS since 2008, the Cabinet Office statement said.
The decision to strip Goodwin of his knighthood was taken on the advice of the Forfeiture Committee, a body made up of senior civil servants, after investigations into the bank's collapse by the UK's financial watchdog and lawmakers.
"They are clear that the failure of RBS played an important role in the financial crisis of 2008-9 which, together with other macroeconomic 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," the statement said.
Given the widespread concern over his decisions, he could not keep the knighthood, the committee concluded. They passed their recommendation to Prime Minister David Cameron, who then informed the queen.