LONDON BRIEFING:JUST HOW safe is the British taxpayers' enforced, multibillion-pound investment in the bailed-out banking sector?

If UK Financial Investments (UKFI), the body charged with looking after the British government’s bank stakes, were a public company instead of a Whitehall department, its shares would have plummeted yesterday on the surprise news that its chief executive is to quit.

Former Treasury mandarin John Kingman, dubbed Britain’s most powerful civil servant, was brought in to run UKFI when it was set up in November last year.

Yet just nine months on, he has signalled his intention to quit, raising fresh questions over the government’s handling of the £70 billion (€81.1 billion) banking bailout.

The timing of his announcement is acutely embarrassing for UK prime minister Gordon Brown.

Kingman, a former Financial Timesjournalist, served as press secretary to Brown during his time as chancellor, and had been regarded as an ally of the increasingly embattled prime minister, who must face a general election by mid-2010.

As a Brown appointee, Kingman’s prospects under a Conservative government would be far from rosy, so there is a view that he is bailing out with time to spare. He is not yet thought to have another job but, at just 40, should have little difficulty securing a well-paid role elsewhere. And it will almost certainly be more lucrative – he may be the most powerful civil servant in Britain, but his pay at UKFI is a relatively modest £143,000.

Kingman’s brief tenure at UKFI was not without controversy, including the forced resignation of Sir Victor Blank as chairman of Lloyds Banking Group and the widely criticised rubberstamping of the £10 million pay package for Stephen Hester, Sir Fred Goodwin’s successor at Royal Bank of Scotland (RBS).

Friends said yesterday he had always intended to return to the more lucrative private arena and had not planned to stay long at UKFI, which oversees the government’s stakes in RBS, Lloyds Banking Group, Bradford Bingley and Northern Rock.

News of his intention to quit came as the government finally appointed a permanent chairman at UKFI. The £100,000 a year job has gone to venture capitalist Sir David Cooksey, who takes over from caretaker chairman Glen Moreno with immediate effect.

The departure of Moreno, another close ally of Brown, was inevitable after revelations earlier this year of his links with a Liechtenstein company accused of tax avoidance.

Cooksey’s first task will be to recruit a new chief executive, although he will start the search knowing his own appointment has been greeted rather less than enthusiastically in the City of London. The 69-year-old is not well known in the banking world but is a leading figure in private equity, an industry almost as poorly thought of as banking.

The management shake-up at UKFI, which will oversee what is to be hoped will be an orderly exit for the government from its bank investments, comes at a difficult time for the banking industry.

The banks still stand accused of failing to honour their promises to resume lending to personal and business customers crippled by the credit crunch and face close scrutiny from the government in the coming months.

British chancellor Alistair Darling hauled the bank bosses to a meeting at the Treasury on Monday in which he is understood to have made it clear that the sector will face a full-scale inquiry if any evidence of anti-competitive behaviour is found.

He has ordered one-to-one meetings between ministers and the bank bosses over the summer, during which they will have to defend themselves against persistent accusations of profiteering on loans.

Amid all this turmoil come changes at the top at Lloyds Banking Group, in which UKFI holds a 43 per cent stake. But the news earlier this week that City grandee Sir Win Bischoff is to succeed Blank as chairman of the bank was, as with Cooksey’s appointment at UKFI, received with little enthusiasm in the City.

A former chairman of Citigroup, Bischoff is regarded as one of the bankers who must bear responsibility for the implosion of the global financial system.

As one commentator said, he’s not so much a new broom as an old brush, and there is a widespread feeling that the opportunity has been missed to bring in someone who could make a real change at the bank.

There is also more than a touch of irony in the fact that Bischoff will take on the £700,000 a year top job at Lloyds on September 15th – the first anniversary of the collapse of Lehman Brothers.

Fiona Walsh writes for the Guardiannewspaper in London