His payout was understood to be limited to around 60% of the maximum following political pressure at RBS, which had to be bailed out during the credit crunch with £45bn of public funds.

The RBS board issued a statement explaining that the decision to award such a bonus was ‘based on policies… approved by 99.2% of shareholders, including UK Financial Investments’. It also revealed that Stephen Hester's salary and related benefits remain ‘unchanged from those put in place when he joined RBS in 2008’.

Commenting on the decision RBS group chairman, Sir Philip Hampton, said:

‘The board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders. This is especially true on the issue of pay. Stephen Hester's pay award reflects progress in the categories agreed with our shareholders as set out in the Remuneration Report.

‘His pay is strongly geared to the recovery of RBS, which he was recruited to turn around, having played no part in its collapse.

‘The priority is to re-shape a business that was far too big and far too risky, reducing legacy losses whilst improving performance in the group's strong core businesses. It is a very large, complex and challenging corporate restructuring task.

‘A safer and more valuable RBS is in the interests of our customers, shareholders and the UK economy and we are progressing well to towards this goal under the leadership of Stephen Hester.’