Johnny Cameron may be the least well-known of the three Royal Bank of Scotland heads on the block - but as the man who runs the institution's fast-growing corporate and investment banking arm, he perhaps exemplifies best the kind of culture the Financial Services Authority (FSA) seems determined to outlaw.

In a regulatory statement to the London Stock Exchange yesterday, Royal Bank announced that chief executive Sir Fred Goodwin, chairman Sir Tom McKillop, and Cameron would all step down from the board.

Asked if Cameron, who according to the statement will leave the board with immediate effect, was also quitting the bank, a spokeswoman said: "At this stage, he is stepping down from the board - at this stage."

Meanwhile, in an open letter to chief executives, the FSA yesterday criticised a culture that encouraged and incentivised risk-taking with hefty bonuses, and said that "inappropriate" pay deals may have been one of the actors that has led to the crisis in the banking sector.

In a time of self-effacement, the global banking sector may now be shifting its position from blaming the world's financial problems on the US sub-prime mortgage crisis to the realisation that almost everywhere bankers were acting irresponsibly.

Prime Minister Gordon Brown pointedly said last week that the crisis had "come from America", and Silvio Berlusconi, Italy's prime minister, blamed a "capitalism of adventurers" in the US, under which risk- taking American investment bankers and home buyers had borrowed more than they could afford.

Now, as bank after bank teeters on the precipice of collapse, it has become clear that European, Asian and American bankers alike have been all too willing to embrace many of the riskiest investments and practices, namely bulking up on risky debt and relying on short-term loans, rather than deposits, to finance their operations.

In its letter, the FSA said it was possible that banks "frequently gave incentives to staff to pursue risky policies, undermining the impact of systems designed to control risk, to the detriment of shareholders and other stakeholders, including depositors, creditors and ultimately taxpayers".

An example of bad practice given by the regulator was "employee bonuses calculated solely on the basis of financial performance".

Meanwhile, details of 53-year-old Cameron's contract, published following his appointment as an executive director in 2006, gave a clear indication of his importance to Royal Bank.

About a third of the bank's income came from the division, which provides banking and financial markets services to large and medium-sized firms.

Since Cameron took over the division in 2001, he has overseen hefty annual profits every year. But with last year's acquisition of Dutch bank ABN Amro, it has become a much impoverished unit.

Under Cameron's contract, he had been in line to receive shares worth up to 100% of his salary, in keeping with a medium-term performance plan, and executive share options worth up to 200% of his salary, which would vest depending on his performance.

In 2007, his total compensation was £2.9m - £1.9m of which came from bonus payments.

The City watchdog yesterday said in a statement that it was calling on banking firms to apply "sound risk management" to future staff pay deals.

The FSA said it was talking to banks and would publish advice next year.

"We would encourage firms to review compensation policies throughout the firm - not just in trading and investment banking areas, to be sure that they are consistent with sound risk management." said FSA chief executive Hector Sants. "We believe that it is possible to set out some high-level criteria against which policies can be assessed."

Sants said that in addition to releasing its advice next year, it will publish its findings about current pay deals in the City "on a no-names basis".

"We believe that given the events of the past year, firms recognise the need to review their remuneration policies," he said.

There has also been criticism levelled over the size of the bonus Goodwin was expected to walk away with on leaving the bank. However, Royal Bank yesterday said no bonus would be awarded to any board member in 2008 and any bonuses earned in 2009 would be paid in shares.

Royal Bank said McKillop would step down at the group's 2009 annual meeting.