A second multi-millionaire investment banker is set to be appointed to head a major UK bank after a dramatic boardroom struggle that appears to have ended Mike Geoghegan's 37-year career at HSBC.

The HSBC chief executive is understood to have lost out in a brutal power struggle for control of the bank caused by the decision of the chairman, Stephen Green, to join the government.

Geoghegan is to be replaced by the head of the investment bank, Stuart Gulliver, who was paid £10m last year, while the chairman's slot is to be filled by the highly regarded finance director, Douglas Flint.

The boardroom upheaval is unprecedented and follows days of speculation about the machinations inside an organisation that has traditionally prided itself on seamless management succession.

Banks rarely replace two such crucial boardroom posts at the same time for fear of sparking concerns about instability. Even during the financial crisis banking groups tried to avoid such upheaval.

The 18 members of HSBC's board are not due to assemble in Shanghai until Wednesday to ratify the new management team, put together by Sir Simon Robertson, the former Goldman Sachs banker responsible for finding Green's successor.

But after days of speculation the boardroom changes leaked last night – even though the board had not met to consider them – suggest the board was riddled with differences about who should succeed Green. An HSBC spokesman was adamant last night that no decision had been made.

The appointment of Gulliver as chief executive is likely to infuriate the Liberal Democrats, who criticised Barclays when it promoted its investment banking head, Bob Diamond, to chief executive this month. Gulliver is another "casino banker" and was the highest paid banker at HSBC last year, with a package of more than £10m. The Lib Dems are concerned that by appointing investment bankers to the helm of banks, the industry is not taking seriously its concerns about reducing the risk in banks.

Ordinarily, Geoghegan would have expected the chairman's role to be his because the bank traditionally hands the job to its chief executive, although this contravenes corporate governance guidelines.

But shareholders lobbied the board not to elevate Geoghegan and it had considered whether it could break even further with tradition by appointing a non-executive director, John Thornton, another former Goldman banker, as chairman.

It was the prospect of this break with the past that forced Geoghegan into a denial that he had threatened to resign if he was not given the chairman's role.

Investors are now likely to ask questions about the way Robertson handled the succession process.

Despite the denial, Geoghegan's career had appeared to be in the balance as City sources said that the board was in an impossible position: if it appointed him to the highest profile role in banking, it might appear that the chief executive had been holding the board to ransom.

City sources said Gulliver had been agitating for promotion for some time and he is now expected to move to Hong Kong, where the bank has decided the office of the chief executive should be based.

It is almost unheard of for a finance director to leapfrog the role of chief executive and be installed as chairman. While shareholders will be reassured that the new chairman will have a firm grip on the business, they will also want a new finance director to be named quickly.

Flint is the longest serving HSBC director, and is held in high regard with just one blot in his career: the disastrous takeover of the sub-prime lender Household Bank in the US, which caused the bank's first ever profits warning. Flint and Gulliver were being groomed for promotion along with the Asian head, Sandy Flockhart.

The pairing of Flint and Gulliver will be a popular choice inside HSBC although few had believed that the hot-headed Geoghegan would be forced out after just four years as chief executive.

While the City awaits confirmation of the changes at HSBC, management upheaval is also underway at other major UK banks. At Barclays Bob Diamond will replace John Varley as chief executive next year and at Lloyds Banking Group a search is on to find a new chief executive to replace Eric Daniels who this week said he is to retire next year.