Sir Fred stepped down after RBS had to be bailed out by the government
Honours watchdog the Forfeiture Committee is to consider whether it should act to strip former RBS boss Sir Fred Goodwin of his knighthood.
Sir Fred took early retirement from RBS last year after the bank needed a £20bn bailout from the government.
Some Labour MPs called for the former chief executive to lose his title.
But Cabinet Secretary Sir Gus O'Donnell said the watchdog usually responded to judgements by the courts or relevant regulatory or professional bodies.
There has been widespread public and political anger over Sir Fred's pension payout, worth about £700,000 a year.
Sir Fred was knighted for services to banking in 2004.
Labour backbencher Gordon Prentice said: "Sir Fred was the central figure in the collapse of a major Scottish institution.
"In these circumstances, retaining a knighthood awarded 'for services to banking' strikes me as bizarre."
In a letter to Mr Prentice, Sir Gus said: "I will, of course, put the points you have made to the Forfeiture Committee, which will look at them against the background I have sketched out above and decide whether any action on its part is appropriate."
He wrote that the committee did "not have a role in supervising or monitoring the subsequent activities of all those who have been granted honours by the state".
"Its role is rather to consider cases for forfeiture in the light of evidence put to it and relevant precedents.
"The normal sources of such evidence are judgments by the courts or by the appropriate regulatory or other professional bodies."
Previous cases had involved a "clear determination of guilt by the appropriate regulatory, judicial or other competent authority on the basis of evidence put to it", Sir Gus wrote.
"The Forfeiture Committee then decided whether the individual's honour should be forfeited. The committee is not normally involved prior to any findings by the appropriate authorities."