Sir James, who lives in Harrogate, stepped down from his role with Leeds Bradford Airport owner Bridgepoint on Friday. He said he was “deeply sorry” for what happened at HBOS and the “ensuing consequences” for the bailed-out bank’s staff, shareholders and taxpayers.
The bank’s former boss was given a knighthood after leaving HBOS in 2006, but said he believed “it is right that I should now ask the appropriate authorities to take the necessary steps for its removal”.
The Parliamentary Commission on Banking Standards claimed in Friday’s report that Sir James was the “architect of the strategy that set the course for disaster’’ and held primary responsibility for the collapse along with former chairman Lord Stevenson and fellow chief executive Andy Hornby.
Their “toxic’’ misjudgments were blamed for the bank’s downfall and £20.5 billion taxpayer bailout at the height of the financial crisis and the commission said they should not be allowed to work in the financial sector again.
Leeds-born Sir James said the report made for “very chastening reading”.
He added: “Although I stood down as CEO of HBOS in 2006, some three years before it was taken over by Lloyds, I have never sought to disassociate myself from what has happened.
“I would therefore like to repeat today what I said when I appeared in public before the Commission in December; namely that I am deeply sorry for what happened at HBOS.”
His decision to forgo 30% of his pension will still leave him with an annual payout worth £406,00.
He said he was also standing down from his voluntary position as a trustee of Cancer Research UK with “great personal sadness”.
But it is understood he remains a senior independent director at catering giant Compass and also chairman of the car credit company Money Barn.
Sir James was chief executive of HBOS from 2001 to 2006 and former deputy chairman of the Financial Services Authority (FSA).
The three former bosses who ran HBOS in the run-up to its dramatic collapse were found to be ultimately to blame for “catastrophic failures of management’’, according to the commission’s report.
Lord Stevenson also came under heavy fire, having infuriated the commission by claiming reckless lending at HBOS was not his fault because he was “only there part time’’.
The commission said it was wrong that Peter Cummings was the only former HBOS director to have been penalised by the FSA after being fined £500,000 and banned for life from working in the City last September.
It called on the new City regulator to consider barring Sir James, Mr Hornby and Lord Stevenson from taking up any role in the financial sector.
But the commission’s chairman Andrew Tyrie refused to say whether he would like to see Sir James or Lord Stevenson lose their titles.
Disgraced ex-Royal Bank of Scotland boss Fred Goodwin was stripped of his knighthood last January after the bank’s £45 billion taxpayer bailout and agreed to a pension cut after a public outcry.
The Honours Forfeiture Committee is responsible for considering cases where people could be stripped of awards.
It is chaired by the Head of the Civil Service - currently Sir Bob Kerslake - and the membership is made up of Whitehall mandarins.
The committee can look at cases where individuals are found guilty of criminal offences, or reprimanded by a regulator. However, it has scope to take into account other factors.
Recent cases include that of former RBS chief executive Fred Goodwin, whose knighthood was annulled in January last year. Anthony Blunt had his knighthood removed in 1980 after being implicated in a spying ring. In 1918 Irish nationalist Roger Casement forfeited the same honour and was executed for treason.
Michael Pragnell, chairman of Cancer Research UK, said: “I fully respect James’ decision to step down as a Trustee and, on behalf of the charity, would like to thank him for his active support over the past five years and wish him well.”
According to the Cancer Research UK website, Sir James was appointed as a trustee in 2008.