Royal Bank of Scotland boss Stephen Hester should not have his bonus cut as a result of the rate-rigging scandal, the bank's chairman said.

Philip Hampton said the chief executive was doing the most difficult job in the industry, and his pay was relatively "modest". Mr Hester also mounted a robust defence of his performance, insisting he had managed to get the taxpayer "off the hook" for huge liabilities over the past four years.

The comments came as the executives were grilled by the Parliamentary Commission on Banking Standards.Majority state-owned RBS was fined £390 million by US and UK regulators last week after damning evidence emerged of traders fixing the Libor interbank-lending rate.

Some 21 staff have left or are going through disciplinary proceedings in the wake of the revelations. But investment banking head John Hourican is the only senior figure to quit.

The commission heard that Mr Hester's basic pay was £1.2 million, plus a pension contribution of £400,000. He is also in line for an annual bonus of up to £2.4 million and a long-term bonus of over £4 million.

Sir Philip insisted Mr Hester's package was "modest, relatively".

"He has been doing one of the most challenging jobs and he has been one of the least well paid," he added.