Hester told the Parliamentary Commission on Banking Standards he deserved the £780,000 payout from his long-term incentive package because of the "huge things" he had achieved since arriving at the taxpayer-owned bank in 2008, the Times reports.
"We have done huge things for society and stakeholders, including [managing] hundreds of billions of risk that the country was exposed to that isn't exposed to any more," Hester said.
"So it is entirely proper to be assessed on the things I have done. I believe that this nation is off the hook for a lot of bad things, though not entirely off the hook. We must be accountable for the balance."
Sir Philip Hampton, the bank's chairman, even suggested Hester was underpaid by comparison with other top global bankers. He added that Hester's bonus, which comes on top of a £1.1m salary and £400,000 pension contribution, was "modest".
The pair appeared in front of the Commission just days after RBS confirmed it would pay a £390m fine for LIBOR-rigging for activities that continued until 2011.
Other senior figures at the bank will have their bonus payments cut as a result of the fine and John Hourican, the head of the investment bank, is leaving the company.
However, Hester said although the LIBOR episode had hurt the bank, it should not be enough to deprive him of a bonus.
Meanwhile, Hourican warned colleagues not to waste "my death" and ordered them to get angry over the LIBOR scandal that led to his resignation.
"We must send a cultural shudder down our organisation and we need to take responsibility, which I am not sure we always have at RBS... I will go to each of the trading floors to make sure this message is delivered," he told the Commission.