In a move designed to circumvent any question of a conflict of interest, the Government has appointed Mr Padraic O'Connor as chairman of the non-statutory board to oversee the ACC/TSB merger and flotation. The decision came hours after the existing chairman, Mr Matt Barrett, accepted a £5 million sterling (€7.5 million) a year job as chief executive of Britain's second largest bank, Barclays.

Mr Barrett's action in stepping down represents the second high-profile resignation by the chairman of a State board in recent months. In March, the chairman of Telecom Eireann, Mr Brian Thompson, resigned when offered a multi-million dollar contract as chief executive of GTS.

At first glance, the prospect of there being a conflict of interest between being chief executive of Barclays and chairman of the pre-flotation ACC/TSB board appears remote. As late as 3 p.m. yesterday, a spokeswoman for Mr Barrett at the British bank was saying that he had not yet decided to step down.

"This is something Matt is thinking about," she said. "He wants to consult widely, especially with the Irish Government."

But many in the industry said Mr Barrett's position would become untenable. Some analysts pointed out that a merged, floated ACC/TSB would still be a tiny bank by Irish standards, representing a juicy morsel for acquisition by a larger, European institution - such as Barclays.

In pragmatic terms, holding the two posts could also prove problematic, given that Mr Barrett is likely to have his hands full as chief executive of Barclays. The bank has come through a period where it lost capital in the Russian market, and suffered at the hands of investors because of uncertainty about the position of chief executive.

Over that time, Barclays also lost its finance director, its treasurer and its directors of planning and corporate communications. Yesterday, Mr Graham Pimlott, director of operations and technology, also left.

Mr Barret follows Mr Michael O'Neill, who quit in April because of heart problems before he could even settle into a job vacated by Mr Martin Taylor in November. The company's share price rose almost 5 per cent on the news, closing at £17.82 sterling.

Sir Peter Middleton, Barclays' chairman and acting chief executive, said he was delighted that Mr Barrett would lead the bank into the new millennium: "Matt is an experienced chief executive with a track record of delivering strong performance in a complex multinational financial services company operating in a highly competitive environment."

At the Bank of Montreal, Sir Peter added, Mr Barrett had expanded the company's operations globally and established a culture of innovation, customer service, and strong employee development.

Mr Barrett was quoted as saying: "I am very excited by the opportunity of leading Barclays, one of the world's most prominent financial institutions. I am confident that we will build on Barclays strong brand and reputation in the market place."

Under his leadership, the Bank of Montreal clocked up nine years of record profits and was regarded as a model employer. He set up taskforces to remove obstacles to the advancement of women, minority groups and disabled people.

Mr Barrett also introduced the first electronic branchless banking services in Canada - an experience Barclays may wish to tap for its own expansion into Internet banking.