FRED Goodwin has avoided the further humiliation of losing his fellowship of one of Scotland's most august bodies after the governing council of the Royal Society of Edinburgh decided unanimously not to expel the ex-chief executive of the Royal Bank of Scotland from its ranks.

However, the 13-strong council of the RSE declined to give any explanation for its decision not to blackball Mr Goodwin, who was stripped of his knighthood last month.

The issue of the former banker's fellowship was put on the agenda of the RSE council's meeting on Monday by Sir John Arbuthnott, its president, following a report by the Financial Services Authority, which was critical of RBS's management under Mr Goodwin.

Last night, Ian Murray, Shadow Business Minister and the Labour MP for Edinburgh South, said: "I'm sure many other members of the society and public will find it quite strange that they did not make a different decision to protect the integrity of the organisation."

A distinguished fellow of the Royal Society told The Herald: "I have to say I'm extremely surprised by this decision.

"It was a major step for the president of the society to take this matter forward on to an official level and I suspect that most fellows, given the president's initiative, would have expected a different outcome."

Last month, the 53-year-old ex-RBS chief was stripped of his knighthood after Whitehall's Forfeiture Committee recommended it be revoked following political pressure from Downing Street and the Treasury. He received the honour in 2004 for "services to banking" after a recommendation from the then Labour Scottish Executive.

The decision to strip Mr Goodwin of his knighthood won support from many politicians as he was at the helm of RBS during its fateful takeover of Dutch bank ABN Amro. RBS required the world's biggest taxpayer bailout – £45.5 billion – to survive.

However, the revoking of the honour also sparked some criticism. Alistair Darling, the former Labour chancellor, said it appeared to have taken place "on a whim". Lord Digby Jones, the ex-trade minister under Labour, said there was "the faint whiff of the lynch mob on the village green" about it".

The Royal Society bestowed a fellowship on Mr Goodwin in 2008, the year after RBS controversially took over ABN Amro.

At the time, the RSE described him as being among a number of "outstanding individuals", who were "chosen in recognition of outstanding contributions to their fields and achievement in public service".

In the spring, the Chartered Institute of Bankers in Scotland, the world's oldest banking body and the UK's leading provider of banking qualifications, is to consider stripping Mr Goodwin of its fellowship.

Yesterday, a spokesman for the RSE said: "Council met on Monday February 20 and, after considering whether or not there was a case for reviewing Fred Goodwin's fellowship, has concluded unanimously that no further action will be taken. The matter is now closed as far as council is concerned."

He stressed that the governing body had reached its conclusion after "extensive discussion".

Asked what the reasons were for its decision, the spokesman replied: "Council does not wish to discuss the detail of that decision."

Asked if the RSE's decision might surprise people and prompt a backlash, he added: "I don't believe that's an issue. As far as council is concerned the issue is closed."

Sir John was approached for a comment last night but declined to add anything to the spokesman's statement. Mr Goodwin was also unavailable.