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The government yesterday warned banks it will keep a close eye on the £37bn of taxpayer funds used to rescue the industry after it announced an "arm's length company" to manage the cash.
The Treasury said it wanted to protect investments in Lloyds TSB, HBOS and Royal Bank of Scotland and "create value" for taxpayers without harming the industry and restricting competition.
Northern Rock and Bradford & Bingley, which the government nationalised this year, will also come under the control of the government-owned company, UK Financial Investments Ltd (UKFI).
The chancellor, Alistair Darling, confirmed Sir Philip Hampton as chairman of the new body and Treasury official John Kingman as chief executive. Hampton is a former finance director of Lloyds TSB and most recently chairman of supermarket group J Sainsbury, while Kingman, who played a central role in the rescue of Northern Rock, is the second-most senior civil servant at the finance ministry.
Top of the agenda for Hampton and Kingman will be persuading banks to use government funds to help individual homeowners struggling with mortgages and small businesses in need of loans.
They will also be given the task of ending the "rewards for excessive risk" culture in the City widely considered to be a major factor in the financial crisis.
The Treasury said: "The company will work to ensure management incentives for banks are based on maximising long-term value and restricting the potential for rewarding failure.
"It will also oversee the conditions of the recapitalisation fund, including maintaining, over the next three years, the availability and active marketing of competitively priced lending to homeowners and small businesses at 2007 levels."
The Treasury said the company's board will include another three non-executive, private sector members and a second, as yet unnamed, Treasury official. It said: "These roles will be filled by individuals of relevant commercial skill and experience to enable UKFI to best meet its objectives, which will be to protect and create value for the taxpayer as shareholders, with due regard to financial stability and acting in a way that promotes competition."
The Liberal Democrat party was concerned ministers might recruit private sector managers with little experience of recession and the decisions that must be made during an economic downturn. Lord Oakeshott, Lib Dem Treasury spokesman, wanted to see non-executives who have "been round the block a few times". He said they should be at least 60 years old to justify the faith of taxpayers, whose funds would in effect be in their hands.
He also warned it was evident banks were seeking to escape government strictures on their activities. Oakeshott said the UKFI "would have its work cut out bringing a more realistic bonus structure and lending policies into force. For this to be put into action you need experienced hands at the helm".
Rock star
John Kingman, regarded inside the civil service as affable and highly intelligent, was promoted to number two at the Treasury in October 2007 at the age of 38. The son of Sir John Kingman, former vice-chancellor of Bristol University, he was tipped for the top from early in his career, taking time out as a Lex writer at the Financial Times to gain much needed business experience.
He was at the heart of discussions over the fate of Northern Rock when as managing director of the Treasury's public service and growth directorate he was in charge of sorting out the future of the Newcastle-based mortgage lender when it came close to collapse last September.
He has reportedly told friends the Northern Rock rescue was the most difficult issue he had ever had to deal with. He favoured nationalisation from early in the process - the option which the government eventually plumped for.
He reprised his emergency banking rescue role in the run-up to the latest bank rescue when he was drafted in to support his colleague Tom Scholar. Kingman was tasked with implementing the plan, and Scholar given the job of trying to persuade other EU countries to adopt the British proposals.
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