Described as an “arm’s-length company”, the objective of the body will be to “protect and create value for the taxpayer as shareholder, with due regard to financial stability and acting in a way that promotes competition”, according to a statement from the UK Treasury.

The government is underwriting capital investments for Royal Bank of Scotland, HBOS and Lloyds TSB. RBS and Lloyds both operate wealth management operations, while HBOS is the parent firm of Insight Investment, a large fund management firm.

Sir Philip Hampton has been named chairman of UKFI. He has held a number of senior posts, including chairmanship of UK retailer J Sainsbury, and between 2002 and 2004 he was group finance director of Lloyds TSB, one of the banks now underpinned by public aid. Meanwhile, John Kingman, one of the UK’s most senior civil servants, will become chief executive. Mr Kingman holds the title of second permanent secretary and managing director, public services & growth, HM Treasury.

The remaining private sector board members will be recruited in due course, the Treasury said.

The government intends that UKFI will manage its investments in nationalised mortgage lenders Northern Rock and part of Bradford & Bingley.

“These companies will continue to have their own independent Boards and management teams, determining their own strategies,” the statement added.