Northern Rock appeared to edge closer to nationalisation today after announcing the appointment of Resolution's former chief executive, who is widely expected to lead the crisis-hit mortgage lender if it moves into state-ownership.

Paul Thompson, who is widely credited with turning around Britannic before its merger with Resolution, was named today as a non-executive at Northern Rock. The bank said his appointment requires approval from the Financial Services Authority, the City watchdog.

There has been growing speculation that the Government is lining up a new management team for Northern Rock if takeover attempts by Virgin Money and the Olivant consortium fail and it becomes state-owned.

There are suggestions that Mr Thompson will become the chief executive of the state-owned bank, which will be chaired by Ron Sandler, the City stalwart who helped save Lloyd's of London from collapse in the 1990s.

Mr Thompson abruptly quit Resolution in March, and received a £4.8 million compensation package from the life insurer. Hugh Osmond's Pearl Assurance fought off competition from Standard Life, which Mr Thompson had allegedly courted, to acquire Resolution for nearly £5 billion.

Northern Rock has been without a chief executive since Adam Applegarth stepped down in disgrace late last year.

The bank currently owes the British taxpayer £50 billion, half of which is made up of emergency funding provided by the Bank of England.

Bryan Sanderson, the current chairman at Northern Rock, who took over from Matt Ridley, said today: "I am delighted to welcome Paul Thompson. Paul will add further skills and experience to the board of Northern Rock that will be invaluable to our ongoing strategic review."

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