Nick Clegg has said he is "sympathetic" to calls for former RBS boss Sir Fred Goodwin to be stripped of his knighthood.
The Deputy Prime Minister's comments come after Labour leader Ed Miliband said Sir Fred's knighthood, bestowed on him in 2004 for "services to banking", should be revoked.
The senior City figure has been heavily criticised for his part in the dramatic collapse of RBS and the honour is being reconsidered.
The Liberal Democrat leader told the Daily Mail: "Honours should be deserved and awarded to unique people who have made Britain a better place.
"I sympathise with those who think it a travesty for a man who did so much damage to the British economy and made so much money in the process to retain his knighthood.
"I understand the outrage and there is an independent process that deals with revoking honours - they must be left to make their own decision on this."
The case has been referred to the Honours Forfeiture Committee, made up of some of the country's most senior civil servants.
Miliband has said his party was "clearly wrong" to recommend Sir Fred be recognised in 2004.
Prime Minister David Cameron is also understood to be "sympathetic" to the calls to strip him of the award and said it was "right" it was reviewed.
Cameron said the committee should take into account a Financial Services Authority (FSA) report about the failures at RBS.
Tory MP Matthew Hancock, who has been among those leading calls for Sir Fred to be stripped of his knighthood, has laid a motion in the House of Commons in a bid to demonstrate the strength of feeling among MPs.
It expresses deep frustration that the banker retains the title "despite being largely responsible for the decisions that led to the Royal Bank of Scotland requiring the largest bailout in British history and of any bank worldwide, at a cost of £45.5 billion, more than £2,300 for each family in the UK or the entire defence budget".
But Labour peer Lord McConnell, who was first minister of Scotland at the time the honour was granted, said Sir Fred was not the only person to blame for the collapse and he should be given a fair hearing.
He said: "Fred Goodwin made mistakes, but so did a lot of other people at RBS, including people on the board who also have honours. They appointed him and agreed the strategy and have never been held to account.
"I think the government, both the Labour and Tory government before it, were making mistakes about regulation.
"I sympathise with the public concern on this issue but I think if you are going to have a system that is relatively independent and fair in allocating these awards then you need to have system that is independent and fair in looking at removing them."