By Matt Scuffham and Steve Slater
LONDON (Reuters) - Britain's government has brought in the UK boss of Credit Suisse to manage the sale of its stakes in Lloyds (LSE:LLOY) and Royal Bank of Scotland (LSE:RBS), hoping for a successful turnaround after it had to bail both out with taxpayers' money in 2008.
James Leigh Pemberton, currently UK chief executive of Credit Suisse (VTX:CSGN), has been named head of UKFI, the institution set up to manage the state's banking investments. He was one of the main advisers to the government when it pumped 45 billion pounds ($71 billion) into RBS and 20 billion into Lloyds to keep them afloat during the 2008 financial crisis.
UKFI has already attracted criticism that it enables the government to interfere too closely in banking affairs - notably when Stephen Hester was ousted as RBS chief executive in June at the behest of the Treasury. Pemberton, 56, must keep lawmakers and regulators happy while also persuading bank bosses that he will protect their interests as the government enforces new levels of competition in the industry.
The Parliamentary Commission on Banking Standards, tasked with recommending proposals to reform banks, in July called for the abolition of UKFI, stating that its remit should be absorbed into Britain's Finance Ministry. But the proposal was rejected by Chancellor George Osborne.
The son of a former Bank of England Governor, Leigh Pemberton's career in the City of London has spanned five decades since he joined SG Warburg in 1979, encompassing roles in banking, capital markets and sales. He joined Credit Suisse in 1994 and was appointed to his current role in 2008.
"His significant experience in the financial services industry makes him the right person to take us through the next phase of our plan for the recovery of Britain's banking system," Osborne said on Monday.
Britain currently has an 81 percent shareholding in RBS and a 39 percent stake in Lloyds. Shares in Lloyds hit a 3-year high last week and are now trading above the average price the government bought at after sources with knowledge of government thinking said it could announce a sale of around a quarter of the shares this month. That would raise around 5 billion pounds for the public purse.
The future for Royal Bank of Scotland is far less certain.
Britain's finance ministry is working with investment bank Rothschild to examine whether RBS should be broken up - hiving its toxic assets into a so-called 'bad bank' and theoretically leaving the good bank better placed to lend.
UKFI said Leigh Pemberton would join in October, replacing Jim O'Neil, who is stepping down as chief executive after three years. O'Neil, an equity capital markets expert, was expected to oversee share sales during his tenure but focussed largely on strategic issues while the banks' share prices remaining depressed. That could yet change before his departure, however.
Leigh Pemberton will become UKFI's executive chairman in January, when current Chairman Robin Budenberg will leave. UKFI will then scrap the role of chief executive.
UKFI also named Bank of America Merrill Lynch's (BAC.N) Oliver Holbourn as its new head of capital markets. Holbourn is currently head of UK, Ireland and South Africa equity capital markets origination at BofA Merrill.
(Additional reporting by Clare Hutchison; Editing by Sophie Walker)