When Gary Hoffman agreed to become chief executive of Northern Rock, he accepted one of the toughest jobs in banking. As head of the nationalised lender, he will have to attract new savings business, without being accused by rivals of unfair competition, and encourage customers to redeem their mortgages at a time when the mortgage market has dried up.

At the same time, he must repay the £24 billion outstanding on Northern Rock's central bank loan and stick within the strict guidelines of the European Commission on state aid.

Mr Hoffman, 47, will join Northern Rock in October, having relinquished his role as vice-chairman at Barclays. He joined Barclays as a graduate 26 years ago and has since run Barclaycard, the bank's credit card business, and chaired its UK banking operations.

For the past four years he has sat on the board and been responsible for corporate responsibility, public policy and other internal issues.

Although his main experience is in personal lending rather than deposits or mortgages, bankers believe that his appointment is a clever choice by Northern Rock, which has been steered by Ron Sandler, its Treasury-appointed executive chairman, since it was taken into public ownership in February.

“[Gary's] a good guy with a strong reputation,” one rival said. “He's been on the sidelines at Barclays for far too long.”

Mr Hoffman, who received a salary and bonus worth £1.1 million last year, will be paid £700,000 a year at Northern Rock, as well as £1.2 million over two years to replace long-term incentives that he is giving up at Barclays. He has already accrued a pension pot during his career of £2.5 million.

The Cambridge University economics graduate said that he could not resist the challenge offered by Northern Rock, which he described as “compelling and exciting”.

Mr Sandler will step back to non-executive chairman on Mr Hoffman's arrival and his £90,000-a-month salary is expected to be trimmed as a result.

Andy Kuipers, Northern Rock's former head of sales, who has stood in as chief executive for the past seven months, will leave at the end of August. He is expected to receive a payoff of at least £560,000, although the details have not been finalised.

Mr Hoffman is on the boards of Visa Europe and Trinity Mirror and is a trustee of the Charities Aid Foundation. Married with two children, he is a Coventry City football supporter.

Times Recommends

• US stocks fall below 9,000 mark
• House price fall smallest in seven months
• Wary investors opt to keep cash in safes