Gary Hoffman, vice-chairman of Barclays Bank, replaces current chief executive Andy Kuipers, set to leave at the end of next month after 20 years at the Newcastle-based lender.

Mr Kuipers is the final member of Northern Rock's original board to leave the bank after last year's crisis.

Northern Rock was nationalised in February after the first run on a British bank in more than a century.

Mr Hoffman's basic salary will be £700,000 a year, and he will also receive three separate payments of £400,000 in compensation for the loss of his participation in Barclays' long-term incentive plans.

"I am excited by the prospect of leading the company back to a position of strength," said Mr Hoffman, 47, who takes up his new role in October.

Northern Rock's previous chief executive, Adam Applegarth, resigned in December following fierce criticism of his role in expanding the former building society too quickly.