The government on Tuesday said it would cancel the knighthood of former Royal Bank of Scotland chief Fred Goodwin following his role in the bank's failure during the credit crisis.

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, the government said in a statement.

Fred Goodwin was the dominant decision maker at RBS at the time, the government continued.

Goodwin had been awarded the knighthood for services to banking, but has since come under heavy criticism from the public after taxpayer funds were used to bail out the stricken bank.

(Reporting by Matt Falloon and Mohammed Abbas)