It's very tempting to say that Sir Fred Goodwin should stay on at Royal Bank of Scotland.

With all its other problems, the last thing that the bank needs now is the disruption and uncertainty of a new man at the helm. And Sir Fred, whatever his shortcomings, knows how to knit two disparate organisations together.

He did it with NatWest and he may yet be able to work the same magic with the ABN Amro assets.

More immediately, there is no one obvious to take over if Sir Fred were to shred himself.

One of the many criticisms to be levelled at the RBS board is that it has not nurtured a strong line-up of potential successors. Johnny Cameron, the head of the wholesale bank, is highly regarded but is, nevertheless, most closely associated with the cascade of fresh losses the bank is having to own up to.

If Sir Fred were to leave immediately, RBS would probably need to attract an outsider.

That is not impossible. Assuming that everything including the kitchen sink has now been written down, there is nothing but upside for a new broom.

However, untainted yet experienced bankers are a rare breed these days. The potential choice may be a bit wider than faced Citigroup and Merrill Lynch last year. But not much.

Nevertheless, to allow Sir Fred to carry on as if this were just an unfortunate blip would be wrong.

As one big institutional investor put it yesterday, this amounts to a humiliating rescue for RBS.

Never in British business history has any company needed such a colossal amount of emergency patching by shareholders. Millions of pension fund members are going to be that much poorer because of Sir Fred's recklessness and hubris.

It will take some time to calculate the total value destruction from his misadventures, both in US sub-prime and leveraged loans and in overpaying for ABN Amro. But the bill will certainly be measured in tens of billions of pounds.

And behind the smoke and mirrors of the rights issue and the scrip dividend lies another painful truth - the dividend is being savagely cut. For the many shareholders who held the shares for income, this will be a big blow.

The claim by the chairman Sir Tom McKillopthat the board takes collective responsibility for RBS and there should be no sacrificial lambs may sound noble, but it hardly reflects reality.

Sir Fred has dominated RBS thinking and doing for years. RBS is very much his creation.

He has been given licence to go against shareholders' wishes once too often. He all but forswore acquisitions 12 months ago, only to change his mind almost immediately and pile into the ABN fight when Barclays made its move.

He then compounded the sin by continuing to chase the ABN deal even after the big prize, the American bank LaSalle, slipped from his grasp. He was infected by deal fever and found himself unable to walk away.

Other bank chief executives have been sacrificed after failing to curb the animal spirits of their employees. In Sir Fred's case, it was clearly his own animal spirits that were the problem.

Yet, for the second time in a month, an overdominant business leader looks like making patsies of institutional investors. Sir Stuart Rose won himself extra powers at Marks & Spencer by riding roughshod over the investors' own code of practice and institutions, after a bit of harrumphing, rolled over.

They cannot afford to look so spineless a second time. Sir Fred's failings have proved much costlier and cannot be ignored. As soon as a decent replacement candidate can be found, Sir Fred should go.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive